Yup, I mentioned high taxes as a factor.
Here's another tax table that shows rates at each income level going back to 1913:
taxfoundation.org
and here's an inflation calculator in which you can punch in a dollar figure for a particular year and find out how much that figure would be in today's dollars, more or less:
westegg.com
The tax table you posted shows that in 1941, the highest tax rate (over 80%) applied only to incomes over $5,000,000 (over $66,000,000 in 2010 dollars). The next year, when the tax structure was reformed to begin paying for the war, the highest bracket applied to incomes of over $200,000 (over $2,600,000 in 2010 dollars). In either case, the +80% rate back then applied to very few individuals at all.
In 1942, an income of $5000 was probably middle of the road, being roughly equivalent to $66,000 today. At that income level, the marginal tax rate was 17%. Even a solid income of $10,000 ($132,000 in 2010 dollars) was taxed at only 29%. You had to make $16,000 ($211,000 in 2010 dollars) to be taxed at 39%, which is only a little bit higher than today. Rates weren't capped at that level like they are today, so the more you made, the higher your rate. A 50% rate didn't kick in until $26,000 ($343,000 in 2010 dollars), and how many people made that kind of money back then? So, the very high rates of that time affected very few people, and most middle class people paid rates comparable to today.
1952 appears to have had the highest rates with a top rate of 92% and the lowest rate at 22.2%. But to get into that 92% bracket, you had to make $300,000 (over $2,400,000 in 2010 dollars). An $8,000 income in 1952 ($65,000 in 2010 dollars) was taxed at 38%, higher than today, but not stratospheric. Rates did go up quickly from there, and a 50% rate kicked in at about $13,000 ($105,000 in 2010 dollars.) I think back then tax shelters were a thriving cottage industry, and I wonder how many people actually paid 50% and 60% rates.
Rates dropped considerably in 1964, and a 37% rate, which is more or less comparable to today's top rate, was applied to incomes of $24,000 ($166,000). Progressively higher rates were applied up to 70% at $200,000 ($1,400,000). High rates on top earners continued until Reagan cut rates and ramped military spending in the mid 80s, and then deficits started to build up again until the Soviet block cracked, military spending decreased, and Clinton enjoyed a peace dividend.
Taking all that together, after WWII low and middle income earners did not pay substantially higher rates than they do today, with the exception of several years in the 1950s. In the three decades after the war, people who reported income of 200-300-400k in today's dollars were subject to considerably higher rates than today but I have to wonder how effective and widespread tax shelters were back then. The confiscatory rates of 70-80-90% applied to almost no one. To the extent rates were higher during the post-war years, they occurred during a period when the US had virtually no competition for manufacturing and exporting. The argument that we expanded the economy when rates were high from 1945-1964 so we should be able to do it again doesn't hold water.
This has been interesting, I don't think I've looked at historical rates this closely before. |
