Post by librarylady on Feb 3, 2019 3:33:53 GMT
On June 19, 1935, Roosevelt asked for sharply higher income tax rates and estate taxes on the wealthy. In his message to Congress, he said:
Social unrest and a deepening sense of unfairness are dangers to our national life which we must minimize by rigorous methods. People know that vast personal incomes come not only through the effort or ability or luck of those who receive them, but also because of the opportunities for advantage which government itself contributes. Therefore, the duty rests upon the government to restrict such incomes by very high taxes.
In truth, there was less to Roosevelt's efforts than it appeared. As historian Joseph Thorndike points out, the heavy lifting in terms of raising taxes on the rich was actually done by Republican Herbert Hoover. In 1932, he raised the top rate to 63% from 25%. The threshold for paying the top rate went up to $1 million from $100,000, but the threshold for paying the 25% rate fell to $38,000 from $100,000.
Roosevelt's 1935 tax increase raised the top rate to 79%, but also sharply raised the threshold to which the top rate applied to $5 million ($76 million in today's dollars). According to historian Mark Leff, there was only one person in the United States who paid even a penny of taxes at the new top rate for the next three years: John D. Rockefeller.
It's important to remember that very few people paid any federal income taxes in those days. In 1935, just 2.1 million taxable returns were filed, 1.6% of Americans. It wasn't until World War II that the federal income tax affected a large percentage of the population. By 1943, 29.4% of Americans were filing tax returns, about the same as today.
Social unrest and a deepening sense of unfairness are dangers to our national life which we must minimize by rigorous methods. People know that vast personal incomes come not only through the effort or ability or luck of those who receive them, but also because of the opportunities for advantage which government itself contributes. Therefore, the duty rests upon the government to restrict such incomes by very high taxes.
In truth, there was less to Roosevelt's efforts than it appeared. As historian Joseph Thorndike points out, the heavy lifting in terms of raising taxes on the rich was actually done by Republican Herbert Hoover. In 1932, he raised the top rate to 63% from 25%. The threshold for paying the top rate went up to $1 million from $100,000, but the threshold for paying the 25% rate fell to $38,000 from $100,000.
Roosevelt's 1935 tax increase raised the top rate to 79%, but also sharply raised the threshold to which the top rate applied to $5 million ($76 million in today's dollars). According to historian Mark Leff, there was only one person in the United States who paid even a penny of taxes at the new top rate for the next three years: John D. Rockefeller.
It's important to remember that very few people paid any federal income taxes in those days. In 1935, just 2.1 million taxable returns were filed, 1.6% of Americans. It wasn't until World War II that the federal income tax affected a large percentage of the population. By 1943, 29.4% of Americans were filing tax returns, about the same as today.
Another thing to remember is that the 1935 tax increase was significantly mitigated in 1938, when Congress lowered the maximum capital gains tax rate to 15% on assets held longer than 18 months. Since most of the income of the very wealthy was in the form of capital gains, the actual effect of the higher income tax rate on them was largely symbolic.
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NPR had an interview this AM with someone who was discussing the history of income taxes. ...and the idea of taxing the wealthy.
So, I went looking for some information.