Debunking an Old, Socialist Myth
I’ve seen numerous internet memes over the years regarding the Left’s justification for higher taxes, claiming their only argument is when Eisenhower was in office, taxes on the rich were a staggering 91% and the economy was at its all-time high.
Okay, before you concoct a vision where people in the upper class routinely dished out 91% of their income, let’s take an in-depth look at what really happened as I summarize an article completely debunking this outlandish claim from Mises.org.
Let’s begin from a quote by Bernie Sanders, who stated, “When radical, socialist Dwight E. Eisenhower was President, I think the highest marginal tax-rate was something like 90%.” This claim was also made by leftists Paul Krugman and Michael Moore among other liberal and progressive thinktank sites.
The second I read about these memes and I had to look further into the issue, as there’s no way anyone would work to maximize their profits only to be taxed by 91%. So, I did what any critical thinker would do and conduct sound research on the subject.
One reason I decided to cite Mises.org, is their authors will use dozens of sources to place into easy-to-read articles. However, articles on Mises are long, so I decided to create an article on My Freedom Flame, being the anarcho-capitalist I am.
What Really Happened?
First off, I won’t deny that Eisenhower’s highest of twenty-four tax brackets was indeed 91%. However, we need to look into how many people actually paid this much. Per the article, in 1955, the only people paying 91% were those making $3,425,766 annually. The article goes on to state these are marginal rates, so people only paid on earnings above that threshold.
Like any critical thinkers who fail to fall victim to statist propaganda of the Left, we need to ask ourselves how much the rich were actually paying.
How much was the government collecting in terms of tax receipts since 1950?
On my attached article, there’s a nice chart depicting this claim, cited from the Tax Foundation. In other words, no matter what the rate has been for top earners, the government had been collecting essentially the same percentage over the past sixty-eight years. So, even when the top tax rate was an astounding 91%, the actual collecting is the same today as it was during the Eisenhower administration.
Okay, so what about personal income taxes?
Tax receipts from personal income taxes have been between 7% and 9% since 1950, being 8.1% in 2014.
So, who is paying these taxes? Hadn’t the burden fallen on the middle and lower classes?
Again, let’s look at the facts rather than second-hand sources telling us curtailed information to fit their agenda, as the Left tends to do.
Okay, in 1980 the top 20% of all earners paid 55% of all taxes.
Today in 2018, the top 20% pays 70% of all taxes.
The top 1% of all earners pays 30% of all taxes today, up from 15% paid in 1980, at the end of the Carter presidency.
Let’s head back to the 1950’s and study what the real taxation looked like.
Okay, so in a study from the Congressional Research Service stated the effective tax rate for the .01% of all earners during the period of the 91% tax bracket was actually 45%, closer to the top marginal rate today, even under Donald Trump’s new tax plan.
How did this occur?
Well, corporate rates have always been lower than 50%, as the article cites. When personal tax rates were higher during the time, the rich simply filed under the corporate tax system.
There were various tax loopholes at the time, too, many of which were eliminated under the Tax Reform Act of 1986 under the Reagan administration, which also coincided with the largest tax rate deductions.
So, the fact was the rich never paid 90% as there were too many loopholes under the old tax code that there was tax fraud everywhere, so common people boasted to others how they cheated on their taxes.