Wednesday, January 13, 2010

Lessons from the Fifties, Part Two: The Draconian Tax Code

In his book "The Fifties", David Halberstam does not devote a chapter to tax policy of that era. However, he does have an offhand reference to it in his chapter on the quiz show scandals. He writes of Van Doren: "In the end his total winnings came to $129,000; but given the draconian taxes of the period, he actually took home only about $28,000." And Halberstam also referred to this again in commenting that the"double or nothing" bet contestants were asked to make on"The $64,000 question" really meant the contestant was risking far more than he/she would be winning, due to the extra income being taxed at higher rate than what was already won.

In retrospect it is inexplicable how the highest tax rate was allowed to be 91% in peacetime, which it was throughout the 1950's. And for awhile during WW2 it was 94%. (See for a history of the highest marginal tax rate.) It dropped to 28% by the late '80's, and now rests at a comfortable 35%.

People who compain about "high taxes" today should study some history before they bellyache. There is a widespread tendency to rail against raising taxez and against reducing benefits. But the real question is, at what level should those taxes and benefits be? What is a sensible system?

When Kansas introduced reappraisal into its Constitution during the early 1980's, there was a huge outcry when people started receiving their new appraisals. As a result, one of the worst Governors ever, Joan Finney, got elected simply by mouthing anti-tax nonsense. I recall being at a townhall meeting on the reappraisal issue, and an anti-tax advocate I knew told me he had heard from someone whose taxes were being doubled. He obviously thought this was a major outrage; my response was "maybe their taxes were too low before and are only now being corrected". Indeed, this is exactly what reaapraisal was doing, it was correcting for the fact that people with older homes had formerly been getting a huge advantage over people with new homes. The new homes were being valued based on current value, while the old homes had been allowed to stay on the taxrolls at decades-old values, which had been established before the real estate boom of the1970's.

Some clear thinking and scientific literacy is sure needed in times like this.

1 comment:

Jason said...

Very nice blog you have here. I like reading political blogs for some reason. Anyway, I have a site myself where people from around the world come and debate on popular issues. I feel as if this will give citizens some form of power, letting their voices be heard.

I'd like to exchange links with you to help spread some traffic around between each other. If you'd like to, please leave a comment under our "Compadres" page when you've added our link and we'll return the favor.

Until then, keep up the good work.