Sunday, April 12, 2009

A Tax Rate of 93%!

This is a Sunday feature looking back at selected articles from the early days of this blog before readership had ramped up. Enjoy.

I was going through some old papers belonging to family again and found the following in the 1963 Canadian Federal Tax Guide:


For the portion of income over $400,000, the tax rate is 80%. Add the Quebec provincial rate of 13.2% to this, and you get total tax rate of 93.2%! According to Truth and Politics, the corresponding US tax rate in 1963 on income over $400,000 was either 87% or 91% depending on what their footnote 7 means.

This really surprised me. Sure, $400,000 was an enormous income in 1963, but to take away almost all income above that level seems incredible. I used to think that income tax rates had risen steadily over the past century, but apparently, there have been some big bumps along the way.

5 comments:

  1. Did you see the NYT article about this the other day. I like this tidbit: "In 1935, Franklin D. Roosevelt raised the top rate to 79 percent, from 63 percent, and raised the income level that qualified for that rate to $5 million (about $75 million today) from $1 million. As the economist Bruce Bartlett has noted, that 79 percent rate apparently applied to only one person in the entire country, John D. Rockefeller".

    http://tinyurl.com/c7hfyh

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  2. Guinness416: I hadn't seen that article. I guess having the president enact a law that affects only one person could make that person feel picked on. But he had his millions to console himself.

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  3. It should be noted that the tax code was also a lot more complex and there were many more deductions. People rarely paid that rate.

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  4. Hylaride: It's certainly true that people rarely paid the 93% rate because few people made $400,000 per year back then. But for those who did make more than this after exhausting all their deductions, the tax rate amounted to confiscation.

    Is it really true that the tax code was more complex then than it is now? I can believe that more deductions were available, but it seems that the tax code only gets more complex with time.

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  5. There was a general simplification in the early 1990s (the US had a similar change under reagan in the 1980s). Since then, they've slowly gotten more complex again. Public transit credit, baby bonus is back, etc. Every other decade or so somebody finally cleans it up a bit.

    Don't forget, Paul Martin laid off almost 1/4 of the civil service under the cuts he implemented during his tenure as Finance Minister and it's easy to forget that he instituted some rather large income tax cuts. In ontario, mike harris cut income taxes by ~10% across the board and there were service cuts as well. Even with the newish health premium here in ontario, we're still paying less tax as a percentage than 1990.

    Though I agree, that top rate was absurdly high. In those days government was looked at differently. We're still generally moving towards less taxes, but reluctance to cut spending is keeping it at bay. Look at the current federal government, they've substantially increased spending and cut taxes...even before the 'stimulus'. :-/

    You can see some charts on government spending here:
    http://tinyurl.com/cao9ac

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