Hacker News Reader

Comment by btilly | Hacker News Reader

It only got a lot more equal because WW1, the Depression, and WW2 combined destroyed most of the stuff the rich people had.

Don't forget 92% marginal tax rates on income over $1 million/year.

That was slashed to 72% under JFK. But regional inequality only took took off after it was slashed to 50% then to 28% by Reagan.

Today the rich have lower tax rates than average Americans.

View on HN

Those rates were basically fiction. All they led to (and the only reason they could be levied) was a huge system of fake on-paper money-losing schemes. People would arrange all sorts of business ventures and other schemes to appear to be losing money, and thus reduce their taxes.

The actual tax receipts as a percentage of income were very close to what they are today.

Reagan's tax deal with Congress was eliminate the tax shelters in exchange for lowing the top rate. The former has been forgotten.

The main goal of the 1986 tax deal was simplification, eliminating tax shelters was inherent to the plan, not something traded for lower rates. If there was any exchange for lower top rates, it was raising corporate and capital gains taxes to keep the plan revenue neutral.

Wealthy people do not care about tax simplification, they care about how much in tax they have to pay. So the trade was lower tax rates overall in exchange for giving up the low tax rates that made tax shelters extremely attractive.

Your position underestimates how pervasive tax avoidance using shelters was at the time. The wealthy were never going to give that up for simplification, after all, they could have simplified their taxes anyway by not investing in shelters if that was their issue.

Was that 92% ever an effective rate of consequence? What kind of receipts did the treasury capture? Not that I'd be against that for the 2016 equiv in USD.

Reply on news.ycombinator.com