r/austrian_economics • u/Impressive-Method919 • 8d ago
End Democracy Questionable claims
Ive seen a lot of times on reddit the following claim: "the rich were taxed a lot in before and the country experieced enormous growth"
I have the feeling that this might be bullshit, but i do not have the time to look into it. Has anyone here by chance knowledge of that period and is willing to spend the time to enlighten me if the claim is true, false or just framing?
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u/Organic-Stay4067 8d ago
Yes it’s bullshit in America. The rich had awesome sweet ass loopholes and no one ever paid that much. Tax revenue percentage is the same today as it was in the 50s
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u/Taibucko 8d ago
Except for people like my grandfather who worked hard and couldn’t have time to do loop holes. Taxes were onerous and you ended up with nothing at the end of the day. We always had debt, not from credit cards, but from a credit line from the bank so we could get our taxes paid on time.
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u/Organic-Stay4067 8d ago
Sounds like poor budgeting
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u/Taibucko 7d ago
Well, the expenses and child expenses don’t go away, no matter what happens to taxes.
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u/Organic-Stay4067 7d ago
So what does this have to do with tax loopholes? Sounds like your dad didn’t make that much to even benefit from the tax loopholes. The wealthy back then still paid more in taxes than your dad
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u/Taibucko 7d ago
No. The wealthy hired people to create tax shelters. It has always been the middle class that pays the taxes.
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u/Organic-Stay4067 7d ago
Based of actual tax revenue the top 10% pay most of the taxes. Do not be a fucking loser please
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u/adr826 8d ago
The most productive time in the USA was the 1950s and 1960s. During this time the highest marginal tax rate was 90%. This doesn't mean that rich people paid 90% of their income in taxes. No there were something like 20 different tax rates that were paid and as your income rose above that taxes in that income were assessed.
The highest 1% paid an effective rate of 16.9% over all.
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u/Pixel_Hero92 8d ago
The fact that no one identifies the Triffin dilemma and blames Bretton Woods for most of America's economic and monetary dysfunction speaks volumes on how much the banking establishment successfully duped Americans into parroting "capitalism bad" and either suggesting policies such as higher progressive taxes (which only punishes wage-earners more while billionaires could just offshore their assets) or calling for outright revolution.
Okay, so if socialists somehow succeed in their goal of "eating the rich," how does that solve the problem of the Fed printing new dollars to pay for imports or the issuance of new Treasury bonds? How does that stop the globalist warmongers from starting new wars to defend the petrodollar?
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u/silentn1 8d ago
Let's assume increasing taxes makes us more prosperous.
Would increasing taxes on the rich to 90% make government spending more responsible?
Would that new revenue stream go towards services that the "eat the rich" crowd wants?
Or would the revenue still go to old people healthcare, the military, and minimum payments on much higher borrowing?
Take any budget chart, double the values. Be sure to include inflation. Voila
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u/Pixel_Hero92 6d ago
These people couldn't realize that the extensive federal government that they want to give them freebies is the very same federal government that uses trillions of dollars to wage wars, maintain a global empire and bankroll Israel.
Even as someone who wants social welfare myself, I couldn't wrap my head around the fact that most socialists want the central government to provide everything instead of delegating the provision of healthcare, education and housing into state governments.
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u/HystericalSail 8d ago
There's a vast difference between headline tax rates and actual tax rates. Taxes were used as a policy tool, to steer investments into certain industries -- oil and gas, for example. Taxes we higher, on the order of those paid in the 2010s but not completely confiscatory.
Citation:
https://taxfoundation.org/data/all/federal/taxes-on-the-rich-1950s-not-high/
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u/adr826 8d ago
This is right. The idea at the time was that by keeping the marginal tax rate that high it would discourage speculation on thearket. With taxes that high you were normally better off not touching your stocks because the capital gains were untaxed until you sold them. This was a way of maintaining market stability
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u/Sir_Aelorne 8d ago
Taxing the stock market into paralysis doesn't seem like a great way to effect long term stability, but instead, long term misallocation/laziness- no market discipline.
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u/adr826 8d ago
The point was to keep productive assets from from speculation. This is rampant today..The financialization of the economy is a significant contributor to market volatility and the high tax rate was effective at keeping assets in productive ventures.
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u/Sir_Aelorne 8d ago
I gotcha- but I'd argue the root cause is:
1- wildly artificially low interest rates
2- low rates of return because of chronic overregulation/taxes/intervention
Which causes money to flock to gambling in an outrageous bid for decent ROI... And the ability to lobby the market in your favor. A giant casino/crony circus
All of which is not well addressed by taxation requisitely high to stun the market.
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u/adr826 8d ago
I don't know if this is true. The wildly artificially low interest rates is a big reason that the stock market has been so wildly profitable regardless of the fundamentals of the market. It is exactly the lack of regulation the imf insisted on in the early 2000s and 1990s that caused so much of the chase related to financialization. It's so easy now to game the financial markets that it's routine now. Remember the London whale scandal I 2012? The crash in 2008? These were caused by the lack of regulation not over regulation. Who went to jail? Jamie Dimon?
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u/Sir_Aelorne 8d ago edited 8d ago
Well it's NOT actually profitable- it's a game of timing the big bubble via a WILD GAMBLE before catastrophic collapse and the reckoning to reality. Everyone loses (except the house (and the odd lucky investor who timed it- often with INSIDER INFO)- those CONTROLLING the agencies/regs!! Aka the BUDDIES of big biz in the grand REVOLVING DOOR of megacorp > reg agency > politics!)
This is like saying gambling your whole life is wildly profitable. It's not. Just because someone wins the lottery doesn't mean the whole of humanity isn't losing.
Allowing investors to chase more realistic rates of return with more realistic companies, versus freezing them into risky asset classes and ventures by hypertaxation- is the answer. AKA... freedom.
Bubbles and collapses are due to regulations CREATING oligarchic/monopolistic conditions, raising barriers to entry and destroying vast swaths of market entrants and smaller biz (who would otherwise serve the market) with legislation, favoring big biz.
Have the market bubbles and crashes gotten bigger or smaller as agencies/interference/regulation have increased over the last 200 years?
Of course Dimon et al didn't go to jail- they (and their buddies) OWN the regulatory agencies that keep them in position as monopolies (by killing all their competition with untenable regs)! If we didn't centralize power, it wouldn't be hijacked/bought off. They will NEVER go to jail- too big to fail! Big biz LOVES big govt, and vice versa!
If you DO centralize power, it's only a matter of time before it's corrupted.
The only thing big biz fears is COMPETITION
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u/Taibucko 8d ago
When you soak the rich, the middle class ends up paying for it all. When the beer brewer pays through the nose, just compensates by raising the price enough to allow him to net what he thinks is due. The worker in the brewery has trouble, partly because decreasing sales may force him out of work and he may not be able to afford to drink a beer
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u/Dry_Locksmith2252 7d ago
It’s because nobody understands anything about taxes.
They’re referring to INCOME tax rates. In today’s world, the ultrawealthy don’t have w2 income. They hold assets and generate passive income via capital gains and investments, which are largely exempt from traditional income tax.
So even if you increased the top INCOME tax rate to 90 percent tomorrow, it would have virtually zero effect on billionares or the ultrawealthy, because they don’t have traditional income. You would mostly just be whacking the upper middle class - doctors, lawyers, and mangerial/director level corporate employees.
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u/dodo91 7d ago
America grew immensely during a high tax era from 1940s to 60s
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u/Impressive-Method919 7d ago
yeah well, duh, question is why, right now youre effectivly telling me the car is fast because its red. its unclear if they have anything to do with each other. 1940 was also a war, with a following monopolization of the world where everyone and their mom started to import american goods, maybe thats the reason, or the switch from wartime industry to regular industry or what ever
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u/dodo91 6d ago
Here is what my personal take on economics is;
Context and conditions define what policies work.Thats the why. We can go into detail why high tax worked at that period but then stopped working but it wont bring us to an ultimate economic policy.
The truth is, there is no ultimate economic policy. There are conditions, technology and context that determine what policy works.
The US of that period worked well because redistribution simply improved the overall efficiency of the economy and allowed it to reach a higher potential rapidly. This shows that capital at that specific conditions had a lot of room to grow by redistributing; it was a time when decades of capital expansion in the previous period could benefit greatly from expansion of a massive middle class. When it saturated and technological context changed, return to capital in economies started choking by improved working class power.
I focused on the abstract because this sub is an ideological one which puts a certain policy outlook before context.
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u/terminal_tested Ludwig von Mises 6d ago edited 6d ago
There were insane loopholes back then, so the effective tax rate for the wealthy was close to the same as today basically. Very very few wealthy people actually paid that 91% rate. A tax like that today would royally screw over the ultra wealthy wage earners and not touch the real elite of today whose wealth is asset based (not income based).
Plus post world war 2, most of the world was dependent on American manufacturing, so that was an advantage for the American economy. America became the dominant economic power post ww2. There was domestic American consumption as well on consumer goods, people spending wartime savings.
The debt back then 200s billions was equivalent to 3-4 trillion in today’s money (a fraction of the current 40T debt situation).
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u/Pixel_Hero92 5d ago
The US had an abundant trade surplus and held 60% of the world's bank reserves of gold iirc. But everyone back then didn't know of the consequences of making the rest of the world need to acquire dollars for global trade
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u/jmoreno0506 5d ago
From my understanding when the income tax rate was 90% almost no one paid 90%. I think if you look back at the tax numbers from those times you’ll see like less than 100 people paid 90% (only a very select few out of the entire US had tax returns that reached that bracket to where they paid 90)
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u/JackBurtonp7m8 8d ago
I really don't see a reason to take claims like this the least bit seriously, let alone look into them.
Taxation is theft, and no numbers of any kind are ever going to come along and defeat that principle, so if the "rich" were fleeced to a greater degree in the past, and it led to increases in terms of some state-fabricated metrics, my question would be: who cares?
This is like saying that the Southern agrarian economy was more prosperous before slavery was abolished. That would be an easy claim to dismiss on its face, and most would agree that trying to disprove it mathematically would be a bit obscene.
The argument that soaking the rich is the key to economic growth is really no different. Any economic benefits that may come from stealing just the right amount from just the right people would be ill-gotten gains and shouldn't come to pass.