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Alexandria Ocasio-Cortez wouldn't pay her 70% tax rate

atlkvb

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And not many others would either. Why not? Because at one time her rate wasn't the highest we've ever charged taxpayers under our wonderful "progressive" tax system that no one ever paid!

It's patently obvious that's too much money to confiscate from any wage earner...even if they earned 10 million dollars as many Hollywood Leftists do! However, they like most folks can and do find ways to get around pleasing Leftists with that much of their earned income.

One day AOC and the rest of the Left will figure out people who are smart enough to earn that much money aren't stupid enough to give it all away to the Government. [eyeroll]


(from Wall street Journal...I've copied it for you cheap Leftists who won't pay for your own subscriptions)

By
Laura Saunders
Jan. 18, 2019 5:30 a.m. ET

It wasn’t that long ago, in 1980, that America had a top income-tax rate of 70% for individuals, nearly double the current top rate of 37%.

And it wasn’t unusual. From 1940 through 1980 the top rate for the highest earners never dipped below 70%. During most of the 1950s, when the U.S. economy dominated the world, the top rate was 91%. It kicked in at $400,000 of taxable income, or roughly $3.7 million in today’s dollars.


This history is relevant given New York Rep. Alexandria Ocasio-Cortez’s recent call for higher tax rates on what she called the “tippy-tops” to raise more revenue. She suggested that a top rate of 70% could take effect at the $10 millionth dollar of income.

But make no mistake: Many top earners during the high-rate era, such as politicians Dwight Eisenhower and Ronald Reagan, entertainer Jack Benny and composer Alan Jay Lerner, didn’t pay the top rates. In 1952, for example, when the top rate was 92%, the highest-earning 1% of taxpayers had an average rate of 32%, according to Elliot Brownlee, a tax historian and emeritus professor at the University of California, Santa Barbara.

Before becoming president, Ronald Reagan had long complained that top income-tax rates were too high. After becoming president, Reagan was instrumental in a sharp cut in the top bracket. PHOTO: GETTY IMAGES
“When top tax rates were high, there was always a large gap between the stated rates and what the highest earners actually paid as a percentage of their income,” says Joel Slemrod, an economics professor at the University of Michigan.

Of course, a filer’s average tax rate is lower than his top rate because the U.S. system is progressive, taxing higher income at higher rates. Still, the income tax due on $1 million of wages in 1952 would have been about $870,000, according to Jay Starkman, a certified public accountant in Atlanta who researches tax history. That’s an 87% average rate, far above the 32% average rate for the top 1%.

By 1980, when the top tax rate was 70%, the average rate on the top 1% of earners had dropped to 23%, according to the Tax Policy Center. Since then, it has ranged between about 19% and 25%.

Top earners avoided high rates in many ways. Then as now, a favorite strategy was to have income that qualified as long-term capital gains, which are usually taxed at far lower rates than ordinary income such as wages.

The rules defining gains were looser then. In 1948, when CBS offered Jack Benny more than $2 million to bring his radio show to the network, he was able to treat it as capital gain, reducing the tax rate to 25% and saving him perhaps $800,000.


Gen. Dwight Eisenhower also successfully argued that $635,000 he earned from his 1948 memoir, “Crusade in Europe,” should be treated as a capital gain, saving him as much as $400,000 of tax, says Joseph Thorndike, a historian with Tax Notes magazine.

Like many high earners during the 1940s, Eisenhower seized on favorable capital-gains tax treatments to avoid high income-tax rates. PHOTO: BETTMANN ARCHIVE/GETTY IMAGES
Such capital-gains treatment isn’t available now, says Mr. Starkman.

Many top entertainers made strategic use of corporations, which also had lower rates than individuals. Stars like Bing Crosby, Errol Flynn and Bette Davis formed corporations that often collected their earnings from studios and paid tax on it at corporate rates. The income could stay there until needed and then be paid out or borrowed. In some cases, the corporation was later “collapsed” and its income taxed as capital gains.

The show-business publication Variety covered the twists and turns of these strategies. In 1955, one headline proclaimed, “‘Look, Ma, I’m a Corporation: Sole Way to Stars’ Riches.’” Another advised in 1957, “Don’t Make a Move—Without CPA.”

Gains and PainsThe top nominal U.S. income-tax rates for individuals, corporations, and long-term capital gains forindividualsSources: Tax Policy Center; Wolters Kluwer (capital gains)Note: includes simplifications
%Long-term capital gainsrate, individualsCorporate tax rateIncome-tax rate,individuals1940’50’60’70’80’902000’10102030405060708090100Long-term capital gains rate, individualsx1967x25%
Some of the avoidance was illegal, because it was easier to hide income from the Internal Revenue Service back then. Alan Jay Lerner, the composer of “My Fair Lady” and other hits, once advised a fellow composer that he would be foolish to pay all his taxes.

Instead, Lerner said, he should keep the money on the Isle of Wight and send his lawyer to bring back needed cash in a suitcase. The IRS battled Lerner on many issues and accepted a $730,000 settlement for 1977-1981, according to Mr. Starkman.

In the 1970s, a growing tax-shelter industry promised to counter high rates in a number of ways, such as by arranging for generous deductions on overvalued assets. This industry flourished although the top rate on “earned” income such as wages was reduced to 50% for most of the decade.

Many shelters were terrible deals, but some weren’t. In California, there was a flap over news reports that Gov. Ronald Reagan paid no state taxes and only a few hundred dollars in federal taxes on his 1970 income of $73,000, in part because of write-offs from shelter provided by a ranch and a cattle company.

Mr. Reagan complained that high top tax rates discouraged work and sometimes claimed he stopped acting for the year when his income reached the 90% bracket. Some doubt this, but there’s no question that Reagan’s fervent opposition to high top rates helped end them. The Tax Reform Act of 1986 purged many special breaks and lowered rates dramatically.

Since then, the U.S.’s top nominal income-tax rate for individuals has never exceeded 39.6%.

—Elisa Cho
contributed to this article.
 
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