God Damm, 90% tax rate!!
The first is a sort of dumb and dumber "we landed on the moon!" feeling where I actually can't believe that someone didn't know that there used to be a 90% marginal tax rate. Perhaps you live outside of the United States?
The second is that the 90% tax rate is completely misleading, as there were so many deductions and loopholes that hardly anybody ever paid it.
Every time somebody brings up the 90% rate, it's always someone on the left attempting a "We could raise tax rates a whole lot more; just look at how high they used to be". It's one of the most disingenuous arguments in politics.
"To some extent this was an illusion. Much of the de facto pay of executives never showed up on their income tax returns, because it took the form of perks. The higher the rate of income tax, the more pressure there was to pay employees upstream of it."
In order to pay the top 91% marginal rate in 1950, for example, you had to be making over 40 times the median income in the US, and that rate only applied to income past $200,000 (in 1950 dollars -- adjusted for today that's close to $2m). And just to end up paying a higher marginal rate than today's maximum of 39.6% you needed to be making roughly 3x the median income.
Comparing a 90% tax bracket then to 90% tax bracket now is comparing apples and oranges.
Some tax shelters were eliminated/reduced in their effectiveness, shifting some of their wealth gain through the year to being classified as actual income.
A lot of people think moving up in to a higher tax bracket means their entire income is taxed at that rate, but it's entirely untrue. The top US tax bracket for 2015 starts at $413,201, but if you make $413,202 only the last $1 is taxed at that top rate.
The sad thing is tiny percentage of current populace (including the rich) have no idea that current income taxes are extraordinarily low historically. Formerly it was generally understood that progressive taxation was a good thing and made sense. America's "glory days" somehow happened with tax rates that conservatives now call "socialist".
I agree progressive taxes make sense. The argument that a flat tax is fair by virtue of already being proportional fails to take into account the relative value of a dollar to the owner of that dollar.
Even as late as the 70s, it was common for just one member of a family to work because that person was the husband/father, and the wife/mother was strongly expected (and, through the way the employment system worked, often more or less forced to) stick to housework and childrearing.
Sure, but I'd happily take 10% of a billion versus taking home 90% of $40k without shedding too many tears.
Marginal tax rates mean a vanishingly small proportion of the population gets hit by increases to the top brackets, but Americans have been conditioned to see themselves as "temporarily embarrassed millionaires".
What does this have to do with anything? Yes, there's a difference between marginal rates and overall rates. If people don't understand that as background context then they shouldn't even be in this discussion.
The main question to ask is, "How much tax is now being forgone by the trend to lower marginal rates over recent decades?" I don't know the number but it is at least many, many billions annually. Also, there were formerly lots of different tax brackets for the ultra-rich, with only the ultra-ultra-rich reaching highest marginal rate.
The question is not whether marginal rates are different from overall rates (which is a given). The question is how much could be gained by creating more brackets at the very top and raising marginal rates on all these top brackets up a bit (though by no means to where they've historically been), because it would make no real difference to the way America's ultra-rich live their lives. In other words, how much could be raised by making our income tax truly progressive again.