As that link points out, the majority of the high earners (top 1%), which were averaged to get to 42%, did not even reach the highest tax bracket. The vast majority it turns out. The highest tax bracket applied to less than 2% of the top 1%.
Who likely didn’t pay that as they had plenty of tax avoidance strategies, not unlike the ultra-wealthy today. The apocryphal story I read some years ago was that these rates were cooked up to make it seem like the wealthy were shouldering the burden of WWII rather than profiting from it.
If .2% of earners REPORT INCOME greater than $x, they paid tax on that!
We get the percentiles straight from the IRS data.
There's this idea that people report they made $100 MM to the IRS, but are like, "Well, I only want to pay tax on $300k of that." And the IRS is like, "Sure."
You wouldn't be in the top .2% if you only reported incomes of $300k to the IRS. You'd barely be in the top 2%.
That’s not what I’m claiming. It’s pretty clear from public records that no one was really paying those rates. The people it may have hypothetically applied to probably didn’t take all of their earnings as taxable income and found ways to avoid paying the top rate. The real rate collected under the 90% regime in the 50s on the top 0.01% of income earners was 55%, not terribly higher than today.
Taxable income is highly elastic as taxes and income increase. See Emmanuel Saez’s paper here [1]. (Conclusion on page 60) it’s a good overview of the inefficiency of high marginal rates.
It’s nice to believe we could just scoop up the wealth of the wealthiest in society and make good use of the money, but it becomes very hard to collect in a hurry in the real world. Most OECD nations with generous social benefits fund them with VAT and taxes on middle income earners. They’ve all abandoned things like wealth taxes and soaring marginal rates for practical reasons.
> Who likely didn’t pay that as they had plenty of tax avoidance strategies,
Again, like I did 4(?) posts above this one, I'm going to ask for evidence, because I've heard this assertion a lot but never seen any specifics. Surely if they had plenty of tax avoidance strategies, you would be able to point to their version of the Double-Irish. Maybe even be able to estimate the magnitude of dollars avoided in taxes?
