What is the Top Tax Bracket Obama is Proposing?

[On the Road]

and what income level does that bracket begin with?

There have been posts comparing the effects of Obama's and McCain's plans on the middle class, but I haven't seen the whole plan laid out.

The top bracket is probably the key to eliminating the deficits. IRRC, the history of the top bracket has gone something like this:

Eisenhower: 90%
Kennedy:    70%
Reagan:     50% (1st tax change)
Reagan:     28% (2nd tax change)
Reagan:      ?  (3rd tax change) 
GHW Bush:   31% corrected
Clinton:    39%
GW Bush:    35% corrected

The top bracket also need to start at a much higher income level. Two-earner midlle-class families should not be in the same bracket as CEOs.

[deadmessengers]

1. Reagan 3?

Huh?

[On the Road]

3. IIRC, Reagan Changed Taxes Three Times

The first two were tax cuts. However, the defecits became so bad that he raised taxes during his second term. I don't remember the top rate at the end of Reagan's term or the top rate during GHWB's tax increase -- I believe it was 33-35%.

I was trying to provide some background from memory in order to elicit corrections and comments. There is a lot of knowledge among DUers. I didn't do any googling beyond checking DU threads, but thought this would be a good discussion to have.

[MidwestTransplant]

9. The wingnuts forget the fact that he raised taxes.

[On the Road]

10. I *Thought* Reagan Raised Taxes

That's what I was looking for with that "Reagan 3" category that confused people. I eliminated it because I didn't see any evidence of it on those linked charts of top brackets. What happened there and what year was it?

[GOTV]

46. Yes Reagan raised taxes. Largest increase ever in inflation adjusted dollars I heard....

.... but it wasn't income tax, it was payroll tax. You know - the tax mostly paid by the little people.

[whistle]

2. WTF is Reagan 3? And I really don't believe the top income tax rate on earned income

...has ever been lower than under GWB and is currently 35% on income above #349,700.00

The 33% rate applies to incomes from $160,850 to $349,699

[On the Road]

4. Thank You

That is part of what I was looking for.

I didn't realize the top bracket started at $350k now. That is an improvement.

[whistle]

5. Here is a reference source of historic top marginal rates in the U.S. from 1913 to 2003

Table
Tax year Top marginal
tax rate (%) Top marginal
tax rate (%) on
earned income,
if different<1> Taxable
income over--
1913 7 500,000
1914 7 500,000
1915 7 500,000
1916 15 2,000,000
1917 67 2,000,000
1918 77 1,000,000
1919 73 1,000,000
1920 73 1,000,000
1921 73 1,000,000
1922 58 200,000
1923 43.5 200,000
1924 46 500,000
1925 25 100,000
1926 25 100,000
1927 25 100,000
1928 25 100,000
1929 24 100,000
1930 25 100,000
1931 25 100,000
1932 63 1,000,000
1933 63 1,000,000
1934 63 1,000,000
1935 63 1,000,000
1936 79 5,000,000
1937 79 5,000,000
1938 79 5,000,000
1939 79 5,000,000
1940 81.1 5,000,000
1941 81 5,000,000
1942 88 200,000
1943 88 200,000
1944 94 <2> 200,000
1945 94 <2> 200,000
1946 86.45 <3> 200,000
1947 86.45 <3> 200,000
1948 82.13 <4> 400,000
1949 82.13 <4> 400,000
1950 84.36 400,000
1951 91 <5> 400,000
1952 92 <6> 400,000
1953 92 <6> 400,000
1954 91 <7> 400,000
1955 91 <7> 400,000
1956 91 <7> 400,000
1957 91 <7> 400,000
1958 91 <7> 400,000
1959 91 <7> 400,000
1960 91 <7> 400,000
1961 91 <7> 400,000
1962 91 <7> 400,000
1963 91 <7> 400,000
1964 77 400,000
1965 70 200,000
1966 70 200,000
1967 70 200,000
1968 75.25 200,000
1969 77 200,000
1970 71.75 200,000
1971 70 60 200,000
1972 70 50 200,000
1973 70 50 200,000
1974 70 50 200,000
1975 70 50 200,000
1976 70 50 200,000
1977 70 50 203,200
1978 70 50 203,200
1979 70 50 215,400
1980 70 50 215,400
1981 69.125 50 215,400
1982 50 85,600
1983 50 109,400
1984 50 162,400
1985 50 169,020
1986 50 175,250
1987 38.5 90,000
1988 28 <8> 29,750 <8>
1989 28 <8> 30,950 <8>
1990 28 <8> 32,450 <8>
1991 31 82,150
1992 31 86,500
1993 39.6 89,150
1994 39.6 250,000
1995 39.6 256,500
1996 39.6 263,750
1997 39.6 271,050
1998 39.6 278,450
1999 39.6 283,150
2000 39.6 288,350
2001 39.1 297,350
2002 38.6 307,050
2003 35 311,950

http://www.truthandpolitics.org/top-rates.php

[On the Road]

7. Thank You for the Souce

I corrected the OP in a couple of places.

Happen to know what Obama is proposing? I am assuming that he will let the Bush tax cuts expire and it revert to a max of 39%, but the political tends to crowd out policy, even on DU.

[TahitiNut]

12. Here's a chart I prepared ...

[phrigndumass]

14. Good information, nice chart! Here it is slightly adjusted :)

:hide:

[TahitiNut]

18. (hisss) (booo)

:evilgrin:

[dionysus]

53. DUzy!!!!!!!!

:spray:

[Beetwasher]

54. LOL!

:thumbsup:

[whistle]

6. And one more reference source that compares top marginal income tax rates and

...capital gains rates over time:

http://www.ctj.org/pdf/regcg.pdf

[Redbear]

8. Obama's top rate is 39.6

same as it was before Bush

[On the Road]

11. Great -- Thank You!

And I assume that the cutoff point will also stay at somewhat around $350k?

[busymom]

13. Why should people closer to the top...

pay an even higher percentage of their income in taxes? Why are they responsible for wiping away the debt? I think people who work hard to get where they are should be taxed at the same rate as everyone else....Tax money that people win or inherit...but not what they've worked for their whole lives to achieve.

I know that isn't a popular idea round here, but those who pay the most in taxes also tend to get the least in benefits from the money....and...if you have scrimped and saved and gone into debt to go to school and train for years and work your way up and finally, finally get that dream job...why should you then pay a larger percentage of your income in taxes? I'm not opposed to paying taxes so that we can have universal healthcare and better schools etc....but everyone should be taxed at the same percentage rate.

Anything else is simply unfair, and it's a reason that my husband refuses to vote dem this time around.

[ContinentalOp]

15. You sure you're on the right site?

"Those who pay the most in taxes also tend to get the least in benefits from the money" is simply flat out WRONG. The richest people have benefited the most from the opportunities in our society. Business owners benefit from having an public-educated workforce that they can hire, publicly funded roads to ship their goods, etc. And people who own the most valuable property benefit the most from the protection of publicly funded police and fire services. American corporations benefit the most from the "protection" of the US military. Our society makes it possible for people to make money and so by definition, the people who make the most money have reaped the biggest benefits from our society.


"but everyone should be taxed at the same percentage rate."

I can't believe you're actually advocating a flat tax on DU!

[busymom]

22. So you can't be a democrat

unless you line up with every single democratic ideal?

Yes, I'm advocating a flat tax...on...DU.

I am not one of the richest people in America, btw...but we pay a shitload of money in taxes at a high percentage rate. We are subject to the alternative minimum tax and can't make any deductions either....all of this on top of our state taxes.

I never benefitted from other people's tax dollars. I didn't qualify for govt. grants to study...I took out loans...most of them private. We're still paying off our student loans and we will be for a long time. We pay tuition for one of our children to attend a private school and we pay the full sticker price. If we didn't earn enough money, he could go for free. We in essence pay for other students to attend the school. That's fine. Yes, we get publically funded roads and protection from the US Military, but....does this mean that since I pay a higher percentage I should get my own personal soldier to protect my family? Can I be first on the roads? No, that would be stupid. But I pay more both in a percentage and dollar figure.

If we all pay teh same percentage of our income in taxes, those who earn more will pay more by default and I'm ok with that.

Find someone else's pockets to get money from or at least pay back my student loans first so that I can benefit from all of the money that someone gave me....

gaaah.

[40ozDonkey]

38. Democrats respect work more than wealth.

The wealthy have had their advocate for the past 8 years and look how well that's turned out for the working poor and middle-class.

[ContinentalOp]

41. No, you're not a Democrat

If you really believe that you "never benefitted from other people's tax dollars." You've never benefited from any publicly funded research? Never used the internet? Never enjoyed any benefits from living in a society with free public education for all? You've never benefited from the professional licensing of doctors lawyers or engineers? You live by yourself in a total vacuum where you never have to work with other people or use any public infrastructure?

[GOTV]

48. If you own a product deliverd over public roads you've benefitted from other people's tax dollars...

... You've got a lot of learnin' to do, student loans or not.

[On the Road]

16. It's a Question of Your Goals

If you want a society in which the top 1% own most of the country, this is the way to do it. Look at the divergence in wealth and net income since the initial Reagan tax cuts. And that's with a tax scheme that is still basically progressive. You're suggesting a change that collects even more from the bottom percentiles and less from the top. To me, that is not a recipe for equity.

It's not only a matter of the nominal tax brackets, but the overall effective tax rate -- the actual percentage that individuals pay to federal, state, and local governments. The effective rate on many taxes, like sales tax, is much higher at the bottom. Bush's tax cut took so much money away from states (via revenue-sharing) that states were forced to raise substantially on everything from driver licenses to admission to state parks. The effect on the median earner was as Howard Dean said, "What tax cut?"

The top tax rate is deceptive. People in the upper percentiles rarely pay anything close to that. It's not just evasion -- most of it is legal tax avoidance. A flat tax scale is a bonanza for the wealthy, and they know it. Warren Buffet famously said that even under the current system, his secretary has a higher effective rate than he does, and he doesn't believe that's right.

If you think that's fair, that is your judgment.

[kath]

17. You don't believe in the concept of progressive taxation???

EEK -- methinks you would be happier at a selfish conservative website.

[seasat]

19. Because people should not be taxed on what they need to live

IMHO, one of the primary reasons for a progressive tax structure is to provide relief for those at the bottom so that they can have a livable wage. A flat tax would wipe that out. The bottom 20% get hammered by regressive sales taxes at the state level and can't survive if we tax them more at the federal level.

These are also marginal rates. For the income up to a certain level, those in the top bracket pay the same taxes as those in the lower brackets. It's only for the dollar of income over that level that they get the higher 35% rate not for their full income.

With deductions, lower capital gains, and lower dividend taxes, they pay a much lower effective rate (total federal taxes/total income) than the top marginal rate. Economic studies have demonstrated that there is no significant income aversion to effective rates below 50%. In other words, we can tax the rich higher and they'll still keep trying to get rich as long as we don't take half their income.

The progressive rate enhances upward mobility. If you put a decrease the financial burden on those at lower income levels, then they'll have capital that can be invested in starting small businesses or their education enhancing their productivity and innovation. This happened during the 60s and 70s when we had some of our nation's largest growth.

With the lowering of the top rates, there has been an increasing disparity in income between the wealthiest and those in the bottom 80%. Median wages are stagnant for the Shrub inc tenure under this lower tax top rate. IMHO, the drop in federal spending on research, safety net programs, education, infrastructure, and other government programs to cover the loss in federal revenue has affected the bottom 80% somewhat contributing to little increase in income in real dollars.

[busymom]

23. Who gets to decide what someone needs to live...

And what kind of a democracy do we have really when working hard to achieve means having to pay a higher percentage of your earned income to support those who don't?

I'm playing devil's advocate a little here (missing GD: P, I guess) but really....why should someone work hard, go to college, pay their dues in a job and finally achieve a little financial security only to have a larger chunk of it taken away than say...their neighbor? Raise the minimum wage to a living wage, make it so that big CEO's of companies can't earn 1000% more than their employees without providing good salaries with benefits, stop the government from jumping in and saving corporations that fail but not helping out the hard-working men and women of this country.

It is just wrong to assume that because someone earns a higher income that they should be required to pay for those who don't..it's kind of arrogant, actually.

flame away.

[seasat]

30. By raising living wages or capping CEO salaries you are doing the same thing.

You'd have a government mandate that affects the income of top wage earners. Higher living wages would increase labor costs lowering margins for CEOs (at least in the short term).

The second thing is that you're ignoring the costs of government that can only be sustained by a higher tax bracket. The CEOs (unless from wealthy families) would need the subsidized public education that benefits them. They'd need the protection that comes from the US military. They'd need the US courts. If their company pays a low wage with little benefits they benefit from the low level of government programs that provide health care and food support to those folks that work for them.

If you actually compare the total tax burden including state and local taxes as percentage of income then the top 1% actually pay only about 10% more of their income over the bottom 20%. They are about 5% from the average income. The Shrub Inc tax cuts actually have the rate paid by the top 1% as lower than the average rate in the 19% just below them.

To cut the government services to the levels necessary to sustain a flat bracket would result in a return to the kind of government we had in the 1920s. Even the CEOs don't want that.

Finally, I disagree that someone that achieves the wealth to have an income in the upper brackets did that solely because of hard work. You're equating financial wealth with personal achievement.

[TheDonkey]

20. wtf? Shouldn't your avatar be of Steve Forbes?

I'm pro-business but even I realize that a flat tax is absolutely absurd and taxing those with larger incomes at a higher rate is not some punishment and does not hinder them from "enjoying" that money they have worked for their whole lives to achieve. Sheesh.

[SoonerPride]

21. Because they can.

Ever watch Sweet 16?

Tell me the uber rich need the money to give their kids two BMWs for their birthdays.

The disparity between the ultra-wealthy and the middle class and then the poor becomes untenable.

You can go the route of France in the 18th century and begin with separating people's heads from their torsos or you can tax them and redistribute the wealth for the greater good of society.


"but those who pay the most in taxes also tend to get the least in benefits from the money" is patently false. you get schools, and roads, and police and fire. You only think government programs like welfare apply? Anyone who succeeds in america is a beneficiary of the system that everyone pays into. There is no "doing it on your own." You benefit from simply having the opportunity to do it without a class system or caste system or some other artificial impediment to success. Sorry, but your outlook is patently right wing and makes me sick to my stomach. It is false, misguided and wholly un-progressive and unacceptable.

[busymom]

24. Hey look...I agree that the ultra-wealthy maybe

shouldn't be handing their kids beamers for their birthdays...but last I checked, we don't live in a socialist country where we share the wealth. I am morally opposed to the idea of basketball players earnning millions each season (for example) but...they should pay the same tax rate that we do...and if people are so opposed to the idea, they'll stop going to the games which in turn will regulate that salary at some point.

Again...I don't get any more police, fire, roads etc than someone paying no taxes at all. Should I demand my own personal public servants...of course not.

Don't call my ideas right wing. I'm sorry if your stomach can't handle some different opinions.

[SoonerPride]

25. But we do live in a socialist country. We should have MORE programs.

...........and less fucking military.

We all pay in.

Some benefit more than others and from them more should be asked in return.

On top of that there should be NO bequething of wealth to offspring.

Cap it at a modest few thousand bucks and then the state takes it to pay teachers more and pay for healthcare for all.

Your kids can make it on their own. And if not, then too bad.

[FlaGranny]

27. No one has to call your

ideas right wing - they just are - sorry.

[SeeTheFuture]

29. Please explain

A previous poster wrote ".....or you can tax them and redistribute the wealth for the greater good of society"......please explain. How is this not socialism, or communism?
Here is my question: Both HRC and BHO both throw around the line (I say thrown because they haven't provided details) "achieve the American dream". We all agree that everybody should be able to, but not everyone can for a myriad of reasons. With that said, what happens once you have achieved the American dream? Now are we supposed to take it back so that the next guy can achieve it? My family and I have achieved this dream through hard work, hard study, and good family. But it would only take a small setback to take it away. Another 10 or 15% tax would kill it for us. I do not want to give away stuff, but I will help someone to help themselves. Please don't flame me for not agreeing with you, that would be a hindrance of my right to free speech.

[SoonerPride]

31. We're talking about increasing taxes on the top 1%, not the middle class.

You would get a break instead of corporate welfare and tax breaks to people so wealthy they have 6 homes and private jets.

Aren't 5 homes enough?

You should embrace Obama's tax policy because it will help you whereas McSame will take your last dollar and then send you kids to die in Iran.

[SeeTheFuture]

34. OK

I do embrace Obama, but 90% of that is his stance on the war. I am a registered independant and want to know what I am buying into.

[SoonerPride]

35. Welcome to DU!

:hi:

You can learn more here

http://www.barackobama.com/issues/economy/#tax-relief

[Greyskye]

43. Some info for you

And welcome to DU! :hi:

Post #39 below: http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x6351872#6354523

I seriously doubt that you will be negatively impacted by Obama's tax plan, unless you are making over $603,000 a year!

[ContinentalOp]

49. "morally opposed to the idea of basketball players earnning millions each season"

LOL, what? So you want to cap athletes' salaries and let the major corporations who own the teams pocket all of that extra money, but progressive taxation is evil and unfair? Gotcha.

"Again...I don't get any more police, fire, roads etc than someone paying no taxes at all."

Again, YES YOU DO. If you own more property, you are getting more of a benefit from the fire and police protection for that property. If you own a business that transports goods using public roads then you are profiting off of the publicly funded infrastructure.

I have no idea what you do but I guarantee that there are many ways in which you reap the benefits of public funding more than the minimum wage earner across town. Myself for example - I make a living thanks to the internet which was developed with tax dollars. Every day in my job I use computer technology that was probably developed in part thanks to research carried out at publicly funded universities. I should give back more than somebody who works at McDonalds.

[GOTV]

52. You don't get more protection than a working homeless man....

... who has no property to be protected? And no savings to be FDIC insured. And no contracts to be protected by the courts.

You have not thought this through.

[gravity]

26. The rich do recieve huge benefits from their taxes

It's a myth that taxes are a zero sum game. Money that provides the infrastructure from schools, roads, government institutions etc are responsible for providing the economic opportunities to make that much money to begin with.

[gravity]

28. There is also the marginal utility of money

Your first $10k you earn is your most valuable, because you need the money to survive by buying food and shelter.

When you are making $100k, an additional $10k is less valuable because it would be used more for discretionary spending. You will still survive if didn't bring in that money, so from a moral standpoint, you can tax that money at a higher rate.

[bicentennial_baby]

44. Ding! We have a winnah!

Econ major-----> thanks you :)

Although, I'd say diminishing marginal utility :P

[Starbucks Anarchist]

33. Are you kidding?

Tax everyone at the same rate?

So the same rate would be applied to a janitor and a CEO? Really?

[busymom]

36. Why not?

If the CEO spent $50,000+ putting himself through college (and that's a lowball estimate), bussed tables and worked odd jobs to get himself through, started at the bottom in the company and worked his way up to CEO, why shouldn't he keep the same percentage of his income as the janitor? Are you saying that the janitor isn't equal to the CEO? Are they not worthy of the same status (employed) and respect?

This will never truly effect me because I don't belong to the ultra wealthy class in this country...Is it ridiculous to own 5 or 6 homes. Yes. If someone works hard to earn the money to pay for it though, they should be entitled to do whatever they want with it.

It's a problem in my opinion that a CEO can earn several million plus annually and not provide true living wages and benefits to his employees...and that is where I would start to be honest. I think a CEO should have an unlimited earning potential AFTER he or she has adequately (and I mean providing a real salary and healthcare benefits) paid employees. THAT is not happening.

The problem is that we don't have living wages in this country and that minimum wage is a joke. Redistributing the wealth though by taking from the rich and giving to the poor isn't progressive though either. The system needs a total fix.

[Starbucks Anarchist]

37. Nice strawman.

Are you saying that the janitor isn't equal to the CEO? Are they not worthy of the same status (employed) and respect?

Clearly, I depsise the working class. :eyes:

If the janitor makes $20,000/year and the CEO makes $1,000,000 a year -- and we tax them at the same rate, let's say 20% for this example -- then that leaves the janitor with $16,000 and the CEO with $800,000.

Are you seriously comparing the two? It's pretty damn obvious that a 20% rate on the janitor's income hurts him a hell of a lot more than the same rate on the CEO.

The more you benefit from this country, the more you should put in. I can't believe I'm reading this crap on DU. :puke:

[Donald Ian Rankin]

40. There may be a CEO like the one you describe out there somewhere.

In fact, I'm sure that in a country of 300,000,000 souls there must be more than one.

But public policy should be based on the 90-some% who don't fit your profile, and started in the middle or - more usually - at the top, not on the small minority who've come up from the bottom.

[bicentennial_baby]

45. Um...WOW

:crazy: I seriously don't know where to begin with that...

[GOTV]

50. Because he has a responsibility to repay the system that enabled his success....

.... simple as that. No one is a self made person.

[CreekDog]

42. you make it sound like if you are successful, that's all you

your country didn't make it possible
your schools didn't help you get the education to make it possible

and i don't know what schools you are talking about, but none of them, none of them rely solely on your tuition to produce the institution that is there --there is government aid, endowments, other charity, alumni, etc. etc. and for state schools, taxpayers specifically.

and not many of us were born magically supporting ourselves. you may have scrimped and saved, but i take it you weren't pulling your own weight for say, at least a couple decades.

in a perfect world there would be no taxes i guess. it's an imperfect world.

in prioritizing your preferred solution (equal tax rate) most think that's a lower priority than many other things. and true fairness is hard to define or agree on, so, majority rules basically.

[GOTV]

47. Because you can't morally ask someone choosing between heat and food to pay even $1 in taxes....

.... that's just foolish.

The poorer you are the smaller percentage you can spare for our communal goals. It's unfortunate that you don't already know that.

Taking 40% of the income of someone that earns 10 million doesn't cause near the pain of taking 40% of the income of someone who earns 10,000.

Same can be said of 1%.

[Clear Blue Sky]

32. Have you factored in deductions?

In the days of 70% tax rates, there were beau coup deductions, meaning that no one actually paid at the top marginal rate. As rates went down, deductions went away or were means tested. As the rates then went up, the deductions did not reappear and are quickly phased out at higher (6 figure) income levels.

[Greyskye]

39. For referrence/comparison, here are the $ limits:

http://money.cnn.com/2008/06/11/news/economy/candidates_taxproposals_tpc/index.htm

  	       MCCAIN  	       OBAMA
Income 	      Avg. tax bill     Avg. tax bill
Over $2.9M 	-$269,364 	+$701,885
$603K and up 	-$45,361 	+$115,974
$227K-$603K 	-$7,871 	+$12
$161K-$227K 	-$4,380 	-$2,789
$112K-$161K 	-$2,614 	-$2,204
$66K-$112K 	-$1,009 	-$1,290
$38K-$66K 	-$319 	        -$1,042
$19K-$38K 	-$113 	        -$892
Under $19K 	-$19 	        -$567

 

[high density]

51. So people making under $66k greatly benefit from Obama's plan

While McCain's plan is tilted in the exact opposite direction. Unfortunately a lot of the delusional McCain voters probably think they will make $2.9 million next year and want the system gamed in their favor for when that happens.