Do you pay enough taxes? What is enough?
When asked on 60 Minutes, Rep. Alexandria Ocasio-Cortez didn’t seem to have a specific tax rate in mind, but then she said, “back in the ’60s…you see tax rates as high as 60 or 70 percent.”
Suddenly, 70 percent tax rates are a progressive plan, although Rep. Ilhan Omar added, “We’ve had it as high as 90 percent.”
That was the top tax rate when I was a kid, and today, many Democrats say if we’d just raise rates on rich people, government would have plenty of money to pay for our wonderful programs.
But it’s a myth. What progressives don’t say, perhaps because they don’t know it, is what economic historian Dr. Phillip Magness explains in my new video: “No one actually paid anywhere close to those rates.”
For more than a decade, Magness has researched old taxes.
He discovered that America’s 90 percent tax bracket didn’t bring in much extra money. That’s because rich people found loopholes.
Then, because of that, and because the high tax rates discouraged work, President Kennedy backed a bill that lowered the top rate to 70 percent.
But it turned out that the 70 percent rate wasn’t very real either.
“A millionaire on average would pay 41 percent,” says Magness, because of “all these deductions and exemptions and carve-outs that are intentionally baked into the tax code.”
If you look at newspapers of that time, you see ads promoting things like free $2,499 ocean cruises.
“(B)asically take a vacation around the Caribbean,” explains Magness, “but while you’re onboard the ship you attend, say, an investing seminar or a real estate seminar, and then write off the trip.”
Some rich people bought musical instruments for their kids and deducted the cost because, say, a clarinet would supposedly provide “therapeutic treatment.”
Instead of investing in ideas that might create real wealth, rich people hired accountants to study the tax code.
“Who can afford the best accountants? It’s always the wealthy,” says Magness.
Today, our top tax rate is 37 percent. A dozen years after President Kennedy’s tax cuts, Ronald Reagan proposed reducing the 70 percent rate, saying, “Our tax system could only be described as un-American.”
“Democrats actually agree with him,” recounts Magness. “Reagan goes to the table and says, ‘Let’s make a deal…cut the rates…and in exchange, we’ll consolidate the tax code.”