So the tax rates in the 1950s were very high, especially for the richest folks. Were there more deductions back then? If not, how come in 1955 federal spending was 14% of GDP whereas today it's over 25%? Even including all government in 1955 spending was only about 25% compared to today's rate of 44%. If tax rates were so high, how come spending as a percent of GFP was almost half?
@ Brian
It's beside the pont mainly because (a.) the highest tax brackets effected very few people ($2.5 million/year adjusted for price inflation and that was hard to come by back then) and (b.) people could get away with not paying their taxes even better than now.
Keep in mind that the top rate is NOT the only rate and is always what hardly anyone pays.
P.S. the top BRACKET was 94% but the effective rate was never allowed to go over 90%.
Tax rates were 90% but they were marginal rates. An individual's earnings would be taxed at approx 20% on the first $2,000, 21% on the next $2,000, etc graduating up to the 90% tax rate which you would not fall under unless you earned in excess of $300,000, whats $300,000 inflation adjusted dollars today?. I've read that an individual would have to earn several million dollars in 1950's dollars to be fully taxed at the 90%.
Additionally *everything* was tax deductable, they were so pervasive that the AMT (Alternative Minimum Tax) was eventually introduced to offset the myriad deductions.
http://www.hoover.org/publications/hoover-digest/article/5728
I'm pretty sure there were far more deductions and loopholes back then. I think I remember hearing that JFK's massive tax cuts were only able to be done due to new ways of shoring up said deductions and loopholes. And actual tax rates remained largely the same in practice, rather than on paper.
In States a fresh law is looked upon as a remedy for evil. Instead of themselves altering what is bad, people begin by demanding a law to alter it. ... In short, a law everywhere and for everything!
~Peter Kropotkin
I'd assume there wasn't a whole hell of a lot of revenue with a 91% top marginal rate, because not as many people would be working. Even if Obama were to raise the top marginal rate from 35% to 39.6%, that would only bring in 70B more/yr.