To justify its proposals of sky-high tax rates on the wealthy, the left typically alludes to the 1950s and 1960s for inspiration. Because the federal government maintained marginal tax rates as high as 91% by the time President John F. Kennedy finished his second year in the White House, progressives believe they can emulate this policy to fund their big-government programs.
How do you know when a leftist is talking? You feel movement in your pocket.
AOC Talks Taxes
Speaking in an interview with 60 Minutes, Rep. Alexandria Ocasio-Cortez (D-NY) floated the idea of a 70% tax rate on the “tippy tops.” She told Anderson Cooper:
“You know, you look at our tax rates back in the ’60s, and when you have a progressive tax rate system, your tax rate, you know, let’s say, from zero to $75,000 may be 10% or 15%, et cetera. But once you get to, like, the tippy tops, on your 10 millionth dollar, sometimes you see tax rates as high as 60 or 70%. That doesn’t mean all $10 million are taxed at an extremely high rate, but it means that as you climb up this ladder, you should be contributing more.”
She concedes that some of her ideas are radical. But Ocasio-Cortez thinks “it only has ever been radicals that have changed this country,” pointing to Abraham Lincoln (Emancipation Proclamation) and Franklin Delano Roosevelt (Social Security).
AOC, as she now promotes her brand, suggested that facts do not matter if you’re morally right. One can only imagine how the Counterfeit News Network would react if someone from the White House uttered such nonsense. While facts may be stupid to her, they are important when you’re devising public policy to confiscate even more from Americans.
So, let’s examine what tax rates on the wealthy were really like in the ‘50s and ‘60s.
The Tax Myth
Many believe that in the decade following World War II the United States experienced incredible economic growth. Everyone lived the American Dream: a job for life, a house, and abundant food on the table. While the country was returning to normal after the war, it still experienced several hiccups: four or five recessions in 10 years, the unemployment rate topped 8% (1958), and inflation was as high as 3% (1956).
But the greatest myth is the tax code.
Leftists, from AOC to economist Paul Krugman, purport that the nation’s economy roared because of high taxes on the rich. It is true that there was a marginal tax rate of 91%, but several other important aspects are omitted from the conversation.
In the ‘50s and ‘60s, the tax code was around 10,000 pages long. The first couple of pages stated that all earnings were taxable and listed the 26 brackets, from 20% on low income to 91% on high income. The remaining pages outlined all the exceptions, exemptions, and statutes.
Simply put: Almost nobody paid the top rate.
However, examples of tax avoidance were legion. As the old joke from that era goes, if you’re a millionaire, you don’t contest the IRS — you lobby the government to garner an exemption.
Brian Domitrovic, assistant professor of history at Sam Houston State University and author of Econoclasts: The Rebels Who Sparked the Supply-Side Revolution, provided a funny story in a Learn Liberty video about this topic. When Hollywood mogul Louis B. Mayer retired from Metro-Goldwyn-Mayer studios (MGM), he was given a lump sum payment of $2.7 million ($20 million today), but it was not subjected to the 91% rate. Instead, Mayer coughed up only 25% because he hired a lobbyist to whisper in the ear of a congressman to write a pet statute that exempted his income from taxation.
Simply put: Almost nobody paid the top rate. It is estimated that only 0.002% of households at the so-called tippy top forked over that much to the tax man. (Their accountants or lobbyists must have been horrible.)
It was so useless that President Kennedy slashed the top marginal levy rate by one-third, along with a myriad of other across-the-board cuts.
Soak the Rich
In the era of President Donald Trump, the left is devoid of substantive and legitimate proposals. When progressives are not calling Trump the reincarnation of Adolf Hitler, they resort to the cliché regressive policy prescription: soak the rich. Studies routinely show that taxing the rich does not achieve much success and that the wealthy already pay most of the country’s bills.
So, what is there left to steal without capital fleeing the Land of the Free?