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In reply to the discussion: Capitalism is NOT a dirty word. [View all]JHB
(37,158 posts)Back during the "should we raise taxes on incomes above $250,000" debates, I looked it up what the brackets used to be. I knew about the 91% top rate, but didn't know where the brackets broke down compared to today.
It turned out that in 1955 there were 24 tax brackets. After adjusting for inflation, 16 of them kicked in at incomes above $250K. Two bloody thirds of them! And 11 of those kicked in above a half million. The infamous top rate was on income above about $3.3 million in 2013 dollars (400K in 1955 dollars). (All these numbers are for a married couple filing jointly.) Digging further, it turned out that ALL progressivity in income taxes for very high incomes was wiped out under Reagan, and has never really come back. The changes by Clinton and Obama were tepid tweaks compared to what came before. Even the Roaring Twenties had more progressivity than we do now.
Part of the "taxes are bad" anger came from bracket creep: before 1984 they weren't indexed for inflation, so if your income rose at the rate of inflation you'd basically stay the same in theoretical spending power, but because your income was going up you'd move into higher brackets. So even if your income was holding even with inflation, taxes were biting deeper and effectively setting you back. By the 70s some people were being affected by taxes that had only affected people with twice their spending power 10 years earlier. That sort of thing ticked people off, and Republicans exploited that anger.