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Comment by eggoa | Hacker News Reader

Sure. Employer observes that they can spend $10,000 on wages to increase the employee's take-home pay by $1,000; or they can spend spend $5,000 on insurance premiums and buy the employee an excellent health plan. The employee and employer both have incentive to take the tax break.

I'm taking about the 1950 here, when the top marginal rate was around 90%.

Edit: grammar.

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The top marginal rate was 91%, yes, but that rate was for income over $200,000 in 1950 dollars, which is (adjusted for inflation) nearly $2m in today's dollars:

http://taxfoundation.org/article/us-federal-individual-incom...

Meanwhile, the median household income in 1950 was under $5,000 (in 1950 dollars):

http://web.stanford.edu/class/polisci120a/immigration/Median...

So although there were very high marginal rates at the top, they applied only to people making over 40 times the median income. And just to pay a higher marginal rate than 2015's maximum of 39.6%, one needed to be making around three times the median income in 1950.

So you'll need another explanation, because it's unlikely that the risk of being bumped to an ultra-high marginal rate was an issue widespread enough to spur the offer of untaxed health care. And as others have pointed out, it's well-documented that the actual reason was a reaction to wartime wage controls -- given the choice, companies would have simply offered more cash.

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