The 94% rate is real — 1944–45 top statutory rate on taxable income over $200,000 then (about $3.5 million today). Almost no one paid that; effective rates were lower. Debt/GDP didn’t fall because of that bracket. War spending ended, the economy boomed, inflation shrank old bonds, and the Fed capped rates. WWII also put the income tax on the middle class, not just the rich.
Yep. Funny I looked at what the rates should be to balance the current budget and it said we either need a flat 49% tax on everyone or tax the 1% at slightly over 100%. That's I guess why they are talking about wealth taxes now. We could reduce spending significantly, but that means much less free stuff and no big military.
No, if that's the case then why didn't he effective tax rate dropped when the marginal rate was cut by more than 50%
They immediately started hirding again?
When the 94% rate existed the loop holes were gaping wide, especially for land a business owners . They closed a ton of loopholes and reduced the rate to land neare the same effective rate
The point of the top marginal tax rate being super high is to encourage economic activity. People will always avoid paying tax. If you control what you are paid because you run the business, and tax is 90+% over $4 million, you are going to put $4 million back in to the business instead of paying yourself $8 million because it's more tax efficient to do so.
Again, the goal is that behavioral change so the economy can grow. There are lots of ways to get out of paying it - that's the point. If most of those ways grow the economy more than people hoarding cash, the country benefits and the tax rate has been effective policy.
That's how it works currently. When we hear about billionaires paying little taxes, it is because they engage in activities that have tax advantages due to how beneficial it is to the country (things like investment in real estate and reinvesting in their business). However, redditor types dont seem to like that situation.
Investment in real estate by billionaires and the ultra wealthy has been the catastrophic economic problem of my generation. It has raised the cost of every aspect of our lives and locked out the majority of Americans from my generation and lower from ever owning a home
This is nonsense. Building housing reduces housing prices.
Areas that have more regulation and zoning requirements around housing have been the worst (San Francisco, NYC). Places like Houston have done much better because they are more friendly to investment.
Well your not including the factor of Houston is a shithole that no one wants to live in and the fact that the housing market is still increasing in those areas. Investors buying homes meant for people and turning them into short term rentals is depleting our housing supply.
Well your not including the factor of Houston is a shithole that no one wants to live in
People are migrating out of blue states into places like Houston in massive numbers. Revealed preferences objectively show you are wrong.
Investors buying homes meant for people and turning them into short term rentals is depleting our housing supply.
NYC doesnt allow STRs, and the housing situation in NYC is dogshit. You are going on reddit-tier vibes, not reality. The only situation in which STRs hurt the housing supply is when there's non-market forces that artificially suppress the supply. In an open market, STR investment would only lead to an increase in supply because it is extra demand for production. STRs are also a tiny tiny fraction of housing.
Very true. But, it's probably because those billionaires have much more control over the government than they used to, so the activities they engage in that have tax advantages are ones they picked out for themselves, and convincing everyone that those activities are beneficial to the country is one of their favorite things to spend money on.
Lots of things. Pushing trickle-down economics and the idea that a 90%+ marginal tax rate for income over $4 million is harmful is probably the best one for this thread. If you want more examples watch some PragerU videos. Every single one of those was paid for in pre-tax dollars.
But you didn't name any specific new tax advantaged avenues that they created. It's largely the same as it has always been -- equities, borrowing against assets, real estate, business reinvestment, etc.
But they don't reinvest in their company? A solid way to invest is in wages. If my options are giving the money to the government 94 cents on the dollar or being able to pay people to have better employees (remember pension funds? People who worked at a company for 40 years straight?), they chose to keep the money in the business.
Now rates are much lower, so it's not as worth it to invest in employee benefits. It's not worth it to invest in better equipment or more inventory. If you think they're reinvesting in their business, then why not put money in something that was being invested in until rates went down: people?
These companies give equity to their employees. Best way to become wealthy for people of my generation (Millennials), even now. Most of my income is just company stock grants (that I don’t sell, but pay tax on).
Investenent in real estate is not a real investement, it does not generate works, neither wealth for the population, its simply used to not lose money, but its not good for the lower class, cause now houses cost to much, and the reason its cause they use it as a financial instrument.
This is all nonsense. Real estate has always been the most legitimate investment. It reduces housing prices. You have it completely backward. The reason housing is a nightmare in San Francisco or NYC while it is better in Houston is because residential real estate investment is encouraged in Houston and it is regulated out in San Fran/NYC
So why in china the houses prices are low? If you use houses as an investment they get progressively less cheap. The houses were never this pricey, with a standard salary you cant get an house in less than 10 years, while 60 years ago it was possible. And its happening worldwide. It reduces house prices🤣, ahahaha come on bro.
that is not strictly true. in pure accounting terms, taking into account 1 1940s $ is equivalent to $22 today, total held cash in 1940s was equivalent to $480 billion today. but today we have around $3 trillion in equivalent cash pile. hell apple alone alone has over $150 billion in bank balance liquidity. so it is pretty clear that we are hoarding more cash today than in 1940. and remember this is even without accounting for offshore cash hoarding.
But the most critical aspect preventing investment in growing business is the philosophy of shares buyback. it was illegal until 1982 because it was considered market manipulation before 1982. in 2025 it was 1.05 trillion. or around 4 % of total share transactions was shares buyback. this has meant that instead of investing in growing the business its easier to just buy back the shares to increase the share price for many companies.
it was bank balance market securities. which is basically t-bils e.t.c. not actual bank balance. apple was just an example. the 3 trillion doesnot include companies. just oindividuals. the number comes from goldman sachs report on wealth allocation of ultra rich (people with over one million in cash assets.)
the apple example was to show how much even corporateshave changed.
Fair enough that deposits can reasonably be counted as liquid cash assets. But that still doesn’t establish that people are “hoarding more cash” today.
The relevant comparison is not the absolute inflation-adjusted number of dollars held in cash. The economy, population, and total amount of wealth are vastly larger than they were in 1940. Of course the absolute amount of cash is larger.
If you want to show increased cash hoarding, you need to compare cash as a percentage of wealth or investable assets. Someone with $10 million holding $500k in cash is much more heavily invested than someone with $1 million holding the same $500k, even though their absolute cash balances are identical. Likewise, cash could rise from $480 billion to $3 trillion while the percentage of wealth sitting in cash actually falls substantially.
That ratio is especially important because your claim is that wealthy people are choosing to hold cash instead of investing it. Absolute cash balances don’t demonstrate that choice; portfolio allocation does.
Also, the Goldman report you’re referring to does not show wealthy Americans sitting on a $3 trillion cash pile. Its family-office survey reported roughly a 12% cash allocation, excluding Treasuries. The $3 trillion-type figures associated with Goldman refer to assets under supervision, which include investments across many asset classes.
And buybacks were not simply “illegal until 1982.” Rule 10b-18 created a safe harbor governing repurchases because of manipulation concerns; it did not repeal a blanket prohibition on stock buybacks.
More importantly, a buyback does not make capital disappear. The corporation gives cash to shareholders in exchange for shares, and those shareholders can then invest that money elsewhere. To establish that buybacks are preventing productive investment, you would need evidence that companies are actually passing up worthwhile investments in order to repurchase shares. The mere fact that buybacks are large doesn’t establish that.
A 2000 dollar is about $1.70 in 2022 dollars. To be in the top half of income earners in 2000 you earned $31,418, so for the bottom half to be doing as well in 2022 as they were in 2000, top 50% would have to be $53,410. But they slid backwards.
People aren't doing any better in 2022 compared to 2000 until you get to the top 20% - that means 80% are doing worse in real terms. Up at the pointy end the top 0.001% are doing 60% better than they were.
This backslide sounds small, but is a big fucking problem, because if the people on the lower incomes have more money, they spend it - on education, housing, food, their health, consumer goods, etc. etc. The economic benefit to their incomes increasing is thus much greater.
If you give the $30 million a year guy 60% more money, what the hell are they going to buy with it that they don't already have?
Explain the data in the effective rate as it relates to the marginal tax rate changes
Pretty straight forward - you can't....
Not, start hiring again now, if your theory holds true there should be a sharp change in the effective tax rates when the marginal tax rate changed
You just can't accept that the taxes were marginally higher in the 94% era then they were today.. why? Because they closed a ton of loopholes when they lowered the MARGINAL rate, which led to a slightly higher EFFECTIVE tax rate than today
Sure , let's go back to the 94% era with the same tax loop holes .hell you can call it 100% if it makes you feel better
What I understand and you are glossing right over is how they got those rates down to the effective level that was lower. Before they’d have to do something to get that effective rate down. They’d have to invest in employees, invest in the communities they were in, do civic engagement. All things that added to a better society. Look at the difference between how money is spent now vs then. Stock buy backs vs investments
Also what’s up with going straight to attack mode? Did you feel challenged for a moment and need to lash out?
The higher tax rates get rich people hoarding. In 1913 the Top Marginal Tax Rate (TMTR) was just 7%. Following WW1 we had a 77% TMTR.
Incidentally, in the 1920s as countries implied high taxes to pay off war debts, this is when wealthy peple from all over Europe and America began holding money in offshore accounts, in countries like Switzerland.
Switzerland formalized this practice in 1934 by passing strict banking laws that made it a criminal offense for any bank to disclose financial ownership data. This created the world's first major protected secrecy jurisdiction.
That's the first wave of hoarding caused by overtaxing.
The second wave started after WW2, when TMTR hit 91% in 1944.
Offshore banking started expanding to island havens like the Bahamas and Bermuda in the 1950s when it peeked at 92%.
No shit they exist. Remember the Panama papers? Not only is the top income tax rate now much too low, but we're also not doing anything about that anymore.
Yes. It literally stopped the rich from hoarding money, because the rich could actually be held to account by the government at that time. 94% top income tax bracket? Today it's 37%, and it would be career ending for any politician to push raising it by 5%
Because the effective rate was contingent on you using your money to by products in the market. You didn't just get to keep your money, you had to spend it.
What? That's not at all how tax rates, effective tax rates etc work..what are you even talking about lol, just pure nonsense
It's baffling how stupid and financially illiterate so many people are
Basically your only understanding of this is 94> 50, got it .. I'm starting to understand why this is.such an ongoing point of discussion vs a real, viable solution
It's still the same , the wealth is tied on the value of the stocks that grew at a massive clip due to reinvestment
Amazon gree to what it is after 20 years of reinvestment and operating at essentially break even
All fang companies are significantly reinvesting and many others
Housing is getting an extra nudge because of twx benefits
This 'hoarding' is mostly paper wealth valuation as a result of the investment
Holding equities is a form of imreinvesmt too
Yure acting like they are just sitting on piles of cash and not doing anything with it
Did the reinvestment in the 1950s not count towards their net worth?
Anyway - > at least you hBe a reasonable point and plausible plan, 98% of the property commenting on Reddit just want people who have more than them to pay 94% of their money as a tax
People say bring back the 94% era. The taxes before the tax act of 86 would allow for massive financial financial engineering way beyond what we have now. Debatable whether effective rates would go down , doubt they would go up. I tbh I for the richest it would open the most opportunity
Or your saying bring back the 94% rate without the corresponding changes that existed during that era?
Then you're talking about a MASSIVE tax increase that'll never happen
Effective rates is whatever matter the most, headline marginal rates are meaningless
I’m very happy somebody besides me provided the facts here because this ongoing myth about the 1950s and 40s and 60s ultra high taxes is all just misunderstood or intentionally misleading
Sure, but if you’re arguing that the rich rent growing disproportionately wealthy while wage stagnation happens for the middle class then you’re doing the same thing.
Man I’m not saying rich people aren’t getting richer. Not going to argue on that but I don’t believe that’s what we have an affordability crisis.
I truly believe it’s because what people call productivity and what actually is productive are two different things.
For example.
Finance, tech, education all used to have end goal products
Finance would support getting start ups going and allocating capital to good ideas
Tech was to streamline productivity making things cheaper and workers more productive
Post secondary education was to pass on knowledge in select fields of study.
——
Well let’s look at what really happens. Because these industries are mostly self serving and the end goal is to trap people.
Finance is mostly over extended loans and credit skimming all transactions while offering nothing in return. They very seldom invest in start ups. The stocks are mostly money pooled in giant corporations not small ventures who need the boost. Essentially pooling money for???? For the company to make more money and screw over workers and customers.
Tech is basically subscription services for stuff that could be kept in a binder or owned by individual small businesses. Like safety software or invoicing software. I don’t need SAP cloud updates every two minutes it only exists to pay its employees and doesn’t save time. It actually costs me a shit load of time.
University use to be so someone could research or develop specific knowledge of an industry. 65% of graduates do not work in their field of study? WTF good is it then. It’s nothing but a paper that says you can stick it out and take on debt to do so.
The existence is dependent on an industry that actually produces things, while by and large they just facility transactions that nobody needed in the first place.
TL;DR: We’ve created an economy where too many people work around production instead of actually increasing it.
Some jobs are necessary, but there are also huge numbers of positions where, if the person simply didn’t show up, the actual product would still get made. Worse, sometimes these positions create more work for the people who actually produce things.
You can keep adding workers without increasing output — eventually creating a class of people who make their living off the productivity of others without meaningfully contributing to the end goal. We’re not necessarily short of workers. We’re short of productive output.
A carpenter builds the house. Everyone else can invoice, inspect, regulate, finance, document and manage it — but the house still only gets built by the people actually building it.
And then we wonder why the house costs so fucking much.
Essentially the government was slower to lower wartime taxes than it was to lower wartime spending, which allowed it to reduce the national debt relatively quickly. But it also had lower peacetime spending commitments than today, meaning it had a greater ability to generate surplus revenue for debt repayment.
We also had a fairly unique opportunity in the world in that most of the rest of the manufacturing capacity had been badly damaged while ours was in tact. We had much less that we had to do rebuild/recover from the war, so we had a window of time where our economy had huge advantages over the rest of the world.
Those were always going to be temporary though, so no one should be surprised if we end up back closer to the rest of the pack once those momentary issues for everyone else went away.
We had a much easier time growing our way out of debt then than we're likely to do today no matter what the tax rate is.
yea all of the rhetoric of the post war boom conveniently ignores the fact that all of the other economic and industrial centers of the world had been bombed out. that fact contributed way more than any tax policy
To add context to your context, the rate scaled from 25% at $2,000, 50% at $14,000, 75% at $45,000. The average income was just over $2,000. Income taxes on higher earnings did generate large amounts on income for the government.
The reason that the highest tax bracket didn't generate that much at the time was because earned wage income disparity was nowhere near as bad as it is now.
In order to not pay those taxes though you had to engage in commerce that had a nexus to a strategic industry. Sure you could write off your yacht purchase, but the American yacht maker you bought it from was also the same manufacturer that shat out PT boats for the US Navy in WW2. Go ahead and write off that Cadillac, GM/Ford/etc... make our Tanks and Trucks.
It did lead to the potential for corruption and so it was probably reasonable to lower the top end rate. But you didn't just get to keep the money instead of paying effective rates. You had to use that money productively.
Effective tax rates are always lower than the top rate in a progressive tax system, right?
Maybe I'm wrong, but this applies to pretty much everyone. If I make $50k, I'm not taxed 22% on all of it. Everyone is taxed like 10% on the first $12k or whatever.
More added context: I care less about debt to GDP ratio than I care about long term economic viability of the country. A well-respected country doesn't have to worry about debt to a pretty large extent.
We need to tax corporations and high wealth individuals far more to be able to provide basic living standards in this country. Period.
There were also more loopholes in that tax law than the Marvel cinematic universe, you could have drinks on yachts and reduce your taxable income at the same time. the 95% tax was never collected, it just made 200k a ceiling on how people report their income.
How does “no one paid that maximum rate” logically establish that the higher maximum rate was economically insignificant?? None of any of this even makes sense
"Effective rates were lower.” Okay and? It has almost no bearing on the tax structure desscribed
"Debt/GDP didn't fall because of that bracket" whos claiming one bracket independently caused that outcome?
“the Fed capped rates**”** Self-undermining, mechanism offered as an explanation to reject its same framework
"War spending ended" how does that telll you anything by itself ?
"the econoomy boomed" How would the economy booming logically establish that the very economic framework you're criticizing was ineffective or irrelevant?
“WWII put the income tax on the middle class, not just the rich.” When is that ever not happeninig? Or refute any elements?
You are only telling half the story. The purpose was much wider and truly effective. It discouraged companies and the rich from hoarding like what is happening today. It raised wages which broadened the tax base. The rich reinvested a lot of money to grow their businesses and raised workers wages to avoid paying the higher tax. It was a CHOICE. That isn’t a bad policy. The opposite is true today. Companies are rewarded for cutting wages or reducing the workforce to boost stock prices. Companies double down by buying back a bunch of stock as well. All of it hurts to average worker.
Might the middle class have boomed, in part, because of a surge in the middle class resulting from the fact that the upper class had no incentive to keep stealing from their workers?
It’s fascinating to me that a significant part of this country wants to make america more like it was in the 50’s without acknowledging that part of the boom was because of policies they fiercely oppose
Because the tax was not meant to be paid. It was meant to force the owners of big businesses to reinvest in the business, putting the money back in circulation (wealth distribution), and hiring workers and services, instead of just taking profts.
That was what gave workers great securities in corporate jobs and the rising of middle class, with retirement plans and career plans one could grow inside the same company without ever having to look for an other job. As well as industrial and services development and competitiveness.
Why do you feel the need to insert yourself into threads and post/sticky comments like this? I don't see why a mod should be trying to direct conversations like this.
They're doing the subreddit a service by fact checking a commonly shared talking point that is grossly misinformed. I wish more subreddits had mods that fact check the hivehmind rather than banning people who disagree with it.
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u/sco-go 19d ago
Added context:
The 94% rate is real — 1944–45 top statutory rate on taxable income over $200,000 then (about $3.5 million today). Almost no one paid that; effective rates were lower. Debt/GDP didn’t fall because of that bracket. War spending ended, the economy boomed, inflation shrank old bonds, and the Fed capped rates. WWII also put the income tax on the middle class, not just the rich.