I'm trying to imagine what the US was like when we were doing "bug things".

Great chart, and a good reminder that our country was thriving when we had tax rates that some claim would destroy our economy.

have a lot of VW Bugs on the road at that time

Nobody paid rates that high. In fact tax revenue as a percent of GDP have been pretty much stable for the last 60 years despite tax rates going down. In the 1950's, you could deduct much more.

In 1955 George Romney made 129,674 which is about 1.1 million today.

He was in the 78% tax bracket but paid 35% in taxes, because there were tons of deductions, significantly more than today.
In 1957, he made about 900,000 (in 2015 dollars) and paid 25% in taxes, so he did pretty good with the deductions that year.

There are always deductions. That is how our system works. Nobody pays the top rate now either. Nobody ever does

I recall a graphic from a Michael Harrington book where, even with the high marginakl rate, actual taxes paid were essentially flat. Everyone ended up paying around a 30% effective tax except near the very bottom and near the very top. There it bumped up to about 35%, but then! tailed off to below 25% for those at the very bottom and top.

The monied classes - those who MOST benefit from our social arrangements - have not paid there way.

I very much appreciate this chart.

It should be pointed out that for many Americans the taxes required of them were a pittance not only because the rate itself was low, but because the great inflationary trend had not yet appeared.

My dad, for instance, never made more than $4,500 a year during the late 1940's and early 1950's.

At the tax rate imposed on him, with its allowance for a wife and two kids, he paid very little in taxes.

Which is how he and so many other heads of households could afford to have a nice two bedroom place in a tree strewn neighborhood with great schools and parks.

He never had less than $ 1,000 in savings, either. Which would be like a thirty something these days reserving some ten or fifteen thousand in savings.

He paid cash for a brand new car every three to four years. We always took a wonderful two week vacation each and every summer.

With the great inflationary trend setting in during the mid to late seventies, the days of the halfway decent lifestyle on one salary were over and done with.

Not only were families likely to have both adults out earning a living to pay for things, more and more often, it was no longer possible for people to get by without the use of credit cards. When you have to pay $ 600 to $ 1,000 for a place to live, and take a hit on what the tax rate on thirty to forty thousand bucks a year happened to be, the days of paying cash for items was over. Ditto the idea that you could take a vacation every year.

And in major metropolitan areas, more and more families never got to take advantage of the mortgage deduction.

And it is rather pathetic that the Democrats are not any better than Republicans at making this situation right. But then, the Big Banks loved the idea that people were living on credit due to high taxes, and the Dems serve the Big Banks just as handily as the "R"'s do. (Apologies to Elizabeth Warren, who certainly has been excellent on the tax rate matter.)

They're also fairly pointless. It's the effective rate that matters.

As marginal rates declined (most of those really high marginal rates applied to nearly nobody) tax shelters have declined. The percentage of GPD taken in by the government hasn't much changed in many, many decades. Of course, the GPD has expanded and contracted a lot, income distribution's changed, etc., but as the marginal tax rates fell the effective tax rate for a given income level hasn't changed much in 80 years.

Oddly, the distribution of income on the marginal rate tables is instructive. The lowest marginal rate was 20% back in the day. Now it's 10%. Even with deductions and the tax avoidance strategies around most people in the bottom quartile paid some income tax. Now few in the bottom 1/3 pay any income tax.

Note also that these just include income tax. Payroll taxes have soared. Corporate taxes have fallen since the '50s and are a much smaller share of the total federal revenue pie--but then again, the pie's been reapportioned so instead of most of the revenue going for things like NASA, etc., it goes for entitlements of one kind or another. If you prefer the word "individual subsidies," "redistribution," "social services," etc., go for it--they're called entitlements in the laws and the regulations, whatever the word may mean colloquially on the street.

Of course, the distinction between "payroll" and "income" tax is paltry. Payroll taxes are just ceilinged pre-dedicated income taxes--Congress can impose no other kind of tax on incomes, they just called it something a bit different. Lets them say they haven't raised income taxes.

The favorite trick in the press is to minimize the difference between effective and marginal or nominal rates, or flip between percentages and absolute dollar amounts, or blur the difference between income and payroll taxes when it suits them but not when it doesn't: So Buffet pays less in taxes than his secretary looking at his effective rate and her top marginal rate, but he pays far more when we look at $ amounts. We're incensed when we look at how payroll taxes stop at a certain income level, but immediately forget about marginal rate increases. Even what I wrote above, that those in the bottom 1/3 seldom pay any income tax provokes whiplash--"but what about payroll taxes?" We love to shift the terms of the debate to make our rhetoric sustainable. We even like to forget that a lot of the general revenues that really just went for projects and such in the '50s and '60s now go for entitlements and to enforce regulations that didn't exist in the '50s and '60s. (It's a massively complex debate and to engage in it requires defining terms, sticking with the definitions, and dealing with each topic and subtopic in turn, not shifting terms and topics as convenient to win debate points.)


A lot of the things included in the OP are funded through bonds paid for by state and local taxes and weren't federal items at all--we just like to think that the only real government is federal, with a godlike omnipotent Uncle Sam that does things at the behest of (R). Doesn't help that many deeply (D) areas, relying on deeply (D) voters to approve infrastructure maintenance for their areas have truly horrendous infrastructure deficits. As taxes increase, (D) are as willing to head for the 'burbs as (R), unless trendy.

But here's the rub: local bonds for building are easy to raise, but for maintenance they suck.

Harris County (think "Houston&quot has a huge bond issue pending to replace retired bond issues. The old bond issues build roads, and the new bond would build roads, so that sounds good. Except that the old roads now need a lot of repair and maintenance. If the bond passes, in a decade the new roads will need repair and maintenance. Those come from continuing revenue sources, not bonds. Building is sexier than maintaining, meeting the needs of those areas with few roads outweighs maintaining the old, failing roads that can be patched, and usually the newer areas are going to provide new businesses and more local income taxes revenue as well as furnish houses for population growth and wealthier people instead of supporting pre-existing businesses and older houses often in declining neighborhoods.

Maintaining is often more expensive than building, as well: You have other infrastructure to work around and preserve, you have to remove before you can build. Vested interests make life hell. Want to build an overpass on new land, piece of cake. Want to build one where there are streets and residents and businesses and it takes years of lawsuits. And heaven help you if you want to work in a historic neighborhood--then you have to replace the sewers under the street without digging through the street.