How Would You Have Done In 1965?

[Donner]

So how would you have done in 1965?  Ran across this table and it got me to thinking about how much each ER in his 40s and 50s owes to Ronald Reagan and the supply side tax cut reforms he implemented. Yes, Paul Volker killed inflation in the early 80s, but it was Ronald Reagan who made most of your ERs (and mine) possible by getting rid of the state slavery outlined below.  What you are looking at is modern day serfdom.   This tax structure is what impelled the Hollywood star into politics in the first place.  The state took away most of what he made out there in Hollywood.  Our fathers never dreamed of ER.  Why?  The Congress never left them enough to save and invest to achieve FIRE.  And that Greatest Generation was a pretty energetic bunch.   If this tax structure was still in play would there ever have been a Silicon Valley and the stock option phenomena?  Something to think about.  Every young FIREee should have a portrait of RR (smiling) hanging in a prominent place in their home.  RR is one of two President’s I can think of who would completely understand,  applaud, support and cheer on the desire to FIRE.  Can anybody guess the other one?

If you want to take 5 minutes to educate yourself a little bit try this site:
http://www.house.gov/jec/fiscal/tx-grwth/reagtxct/reagtxct.htm

Then go to this site and take the quiz (might want to download the picture, too):
http://www.irs.gov/app/understandingTaxes/servlet/IWT2L6ol#qcheck


Marginal and Average Tax Rates
1965 Rates
(Joint Returns)

Taxable Base Marginal Avg.
Income Amount Rate Tax Rate

00$1,000 $0 14% $140 14.0%
0002,000 140 15 290 14.5
0003,000 290 16 450 15.0
0004,000 450 17 620 15.5
0008,000 620 19 1,380 17.4
0012,000 1,380 22 2,260 18.8
0016,000 2,260 25 3,260 20.4
0020,000 3,260 28 4,380 21.9
0024,000 4,380 32 5,660 23.6
0028,000 5,660 36 7,100 25.4
0032,000 7,100 39 8,660 27.1
0036,000 8,660 42 10,340 28.7
0040,000 10,340 45 12,140 30.4
0044,000 12,140 48 14,060 32.0
0052,000 14,060 50 18,060 34.7
0064,000 18,060 53 24,420 38.2
0076,000 24,420 55 31,020 40.8
0088,000 31,020 58 37,980 43.2
0100,000 37,980 60 45,180 45.2
0120,000 45,180 62 57,580 48.0
0140,000 57,580 64 70,380 50.3
0160,000 70,380 66 83,580 52.2
0180,000 83,580 68 97,180 54.0
0200,000 97,180 69 110,980 55.5
0300,000 110,980 70 189,980 60.3
0400,000 180,980 70 250,980 62.7
00001mill 250,980 70 670,980 67.1
00010mill 670,980 70 6,970,980 69.7
00100mill 6,970,980 70 69,920,980 70.0


Donner

 

[cute fuzzy bunny]

Sure the rates in todays dollars are steep, but if you made 12k a year in '65 you were doing pretty dang well, and someone pulling down $20k was living a pretty good upper middle class lifestyle...

Looking at the tax rates today for a particular profession and what that profession brings home, was the tax rate for the same professions income level 35 years ago higher, lower, or the same?

I'll bet it was close to the same.

Of course, if you made a million bucks, you got soaked. And probably made use of the bazillion tax shelters that have been weeded out, like renting out billboards in the everglades.

 

[Donner]

You of the Ever Changing Moniker--

You may have something of a point. But think about this -- if this tax structure had stayed intact each and every year since 1965, and you in your profession worked your way up the income scale due to promotions etc and the effects of inflation, you would have been pole axed by IRS all the way along the line. You probably would have ERed a long,long time ago out of sheer disgust at turning over so much of your hard earned income to your friendly Uncle!

Donner

 

[cute fuzzy bunny]

Eh, I like a little change of scenery every now and then, however, remember that you still dont know me.

Sure if the tax structure didnt track the rise in wages over time, that would suck. But it does!

 

[sgeeeee]

I'm not sure what you see in that table, Donner, but it isn't clear to me that RR's tax changes helped me at all. I know that by reducing allowable deductions on many fronts, he reduced the tax rates. This had an adverse effect on the value of my house and the mortgage deduction that was so important to me at the time. I think my tax burden remained about the same.

At the end of his terms, he had grown both the government and the deficit. So we have to pay for that sooner or later. It's similar to our current Resident. It's not really a tax break if you run a significant deficit. It's only postponing the tax burden that has to come.

 

[JB]

I'm at the tail end of the 15% rate now. Assuming an average of 4% inflation over 40 years the conversion multiple is 5x. For a single person the 25% rate kicks in at around 30,000 (todays dollars). So in 1965, the rate would have been 18-19%!! For low incomes, they're worse off, middle incomes about the same, and the rich were soaked. But didn't they have lots of loopholes for rich prople back then?

In my view the biggest risk we face today is that we're living in a fantasy world of low taxes and high spending. I'm all for paygo except under unusual situations. The US dept is almost $30,000 per person and growing. Back in 1965 it was around $1,000 per person, or $5,000 in todays dollars.

Add $1500 per person in interest on the debt and the picture doesn't look so rosy.

 

[MooreBonds]

Sure if the tax structure didnt track the rise in wages over time, that would suck. But it does!

Uh, Cap'n Mystery...me thinks you don't quites understands his comment...

It's not the concept of the tax structure 'tracking wages' over time (indexing) - rather, the point Donner is getting at is the very structure itself (i.e. lowest rate starts at 14%, and very quickly rises).

Using the Bureau of Labor Statistics website (http://data.bls.gov/cgi-bin/surveymost?bls)
the only data available from 1967 is the CPI for all urban consumers. The index starts at 100 in 1967, and is currently at about 550. If you assume incomes have risen a wee bit higher than prices, let's say the index for wages would be 600 in 2005. That gives us a "multiplier of 6" to use on the income tax table from the 60s that Donner posted.

While it may seem reasonable that an income of $120,000 in 2005 dollars (equivalent to $20,000 in 1960s) would have a marginal federal income tax rate of 28%, just remember that this was when Medicare/SS taxes were far lower, and state taxes were (presumably, since I wasn't even a twinkle in anyone's eye) lower (?)....and God-forbid if you pulled in $300,000 in 2005 dollars - you'd be facing a marginal tax rate of 50%, PLUS SS/Medicare, PLUS city/state taxes, PLUS all of the other taxes you now pay.

So while it is correct that a majority of people wouldn't be bothered too much (except the working poor in the lowest brackets...now how's about that? Who woulda thunk that RR the Great would have helped the working poor by revamping the tax code? ), anyone pulling in more than, say, $240,000/year would be hit a LOT heavier by the Kennedy code than what it is now.

Come to think of it....was the whole reason for the high tax code to begin with to keep the 'old money' in power (i.e. Kennedy) and keep any new money taxed to death so it wouldn't challenge the old money?

Calm down, now....just a LNP (Late Night Post) before heading off to bed.

Peter

 

[Austin_Explorer]

Come to think of it....was the whole reason for the high tax code to begin with to keep the 'old money' in power (i.e. Kennedy) and keep any new money taxed to death so it wouldn't challenge the old money?  

The top tax rate was even higher during the Eisenhower administration:

http://home.att.net/~Resurgence/TaxTimeline.htm

Johnson was in the White House when the top rate was lowered from 91% to 70%. Kennedy didn't lower the rate, but he didn't raise it either. Of course there wasn't much room in which to raise.

If the top rate hits 91% again we better get some Swedish-like services to help ease the pain!

 

[Mr._johngalt]

In 1965 I had pretty much one thing on my mind and it wasn't
interest rates or taxes

JG

 

[Cut-Throat]

Ran across this table and it got me to thinking about how much each ER in his 40s and 50s owes to Ronald Reagan and the supply side tax cut reforms he implemented. Yes, Paul Volker killed inflation in the early 80s, but it was Ronald Reagan who made most of your ERs (and mine) possible by getting rid of the state slavery outlined below.

Donner Dreamland :

Even Bush Sr. Called Reagans ideas "Voodoo Economics" - This era was no different than a family going on a spending spree with a Visa Card.

BTW - Nobody paid these taxes in the middle class. Everything was deductable. No more deductions for the middle class.

Although compared to today's Buffoon in the white house, Reagan looks pretty good. How low we've sunk.

 

[Eagle43]

In 1965 I just got married. Made about 2-3k a year. 14-15% on that amount was outrageous, but of course, I never noticed it.

RR was a great president; probably the most conservative one we will ever have. He ran up the deficit, but to that I say two words: "Tip O'neill". RR came in after the worst president in my lifetime, namely Jimmy Carter. Talk about ruining the middle class? High inflation, high taxes, high interest rate, Iran hostages, and a president who told us we had a "malaise". JC is a great human being, but as president, he sucked. We can thank Carter for one thing, though, he ushered in a flock of Republican presidents. The less taxes, the better, IMHO.

Today, the liberals keep losing elections. But, that will not last forever, IMHO. Then, taxes will rise again. So, Donner, keep that chart handy. We may need it.

 

[Cut-Throat]

RR came in after the worst president in my lifetime, namely Jimmy Carter.  Talk about ruining the middle class? High inflation, high taxes, high interest rate, Iran hostages, and a president who told us we had a "malaise". JC is a great human being, but as president, he sucked.

Not much of a student of history are you?
Jimmy Carter actually did something about inflation and the economy, and paid the political price. He appointed Paul Volcker and enacted the engine of deregulation. You remember Gerald Ford and his Whip Inflation Now Buttons? Carter will go down as the most underrated president in your lifetime.

How does Jimmy Carter get the blame for the Iran Hostages? - How many Hostages died? What do you think about the killing of 288 Americans in Beirut during Ronald Reagans watch. Is this Reagans Fault?

Eagle, you can spin things any way you want, but only the people that will buy it, are the ones that listen to the Rush Limbaugh show.

 

[windsurf]

In 1965 I had pretty much one thing on my mind and it wasn't
interest rates or taxes   

JG
Har!! Me, too!  17 years old; if only I knew then what I know now and I don't mean econ!

 

[cute fuzzy bunny]

In 1965 I had pretty much one thing on my mind and it wasn't
interest rates or taxes

JG

Did you do that with your right hand or your left hand?

 

[Austin_Explorer]

RR was a great president; probably the most conservative one we will ever have. He ran up the deficit, but to that I say two words:  "Tip O'neill".

A very common tactic. Blame someone else for not balancing the budget. This comment would be dead on if RR submitted a balanced budget to Congress only to get it thrown back in his face with lots of pork added onto it. But he never did.

Now we have a Republican majority in Congress and a Republican President. Is there a balanced budget on the horizon? I guess we don't have Tip O'Neill to kick around anymore, so now who's to blame?

 

[Nords]

Not much of a student of history are you?
Jimmy Carter actually did something about inflation and the economy, and paid the political price. He appointed Paul Volcker and enacted the engine of deregulation. You remember Gerald Ford and his Whip Inflation Now Buttons? Carter will go down as the most underrated president in your lifetime.

I think Jimmy Carter is a clear warning to those who elect detail-oriented nuclear submariners to public office.

On his first day after the Inauguration he was briefed by his USMC staff officer on how Marine ONE would evacuate him in the event of an emergency. Carter listened attentively and when the brief was finished said "How long will that take?" When he got the answer, he said "OK, go." Confusion ensued while the officer tactfully verified that he'd really just been told to evacuate the President from the Oval Office on the job's first day. Once that was cleared up he started the process... and it was a miserable failure.

I think Carter decided from then on to be personally involved in every facet of the job, no matter how insignificant.

My FIL says that the most difficult guy the media ever associated with was LBJ, but Carter was #2 by a very close margin. At least with LBJ you had no illusions what you were getting into.

OTOH I have a soft spot for Reagan. Who ever thought we could win the Cold War just by raising my pay over 25%?

 

[cute fuzzy bunny]

I do a pretty decent reagan imitation...


"Wellllll nancy...huh huh huh huh huh"/

Pretty good, huh?

 

[Eagle43]

Not much of a student of history are you?
Jimmy Carter actually did something about inflation and the economy, and paid the political price. He appointed Paul Volcker and enacted the engine of deregulation. You remember Gerald Ford and his Whip Inflation Now Buttons? Carter will go down as the most underrated president in your lifetime.

How does Jimmy Carter get the blame for the Iran Hostages? - How many Hostages died? What do you think about the killing of 288 Americans in Beirut during Ronald Reagans watch. Is this Reagans Fault?

Eagle, you can spin things any way you want, but only the people that will buy it, are the ones that listen to the Rush Limbaugh show.

C-T There you go again; spinning 'em your way. Carter let the hostages stay in Iran for 444 days. Did you see that in your history books?? I believe they got out when RR was inaugurated 1/20/81. That would be part of history as well. It could be reasonably argued that Carter's behavior encouraged whacko Muslims to think the U.S. was a paper tiger. You might check out the interest rate and the inflation rate during Carter's term too. Volcker notwithstanding, the American people couldn't wait to get Carter out of office. I certainly broke a wrist voting for Reagan. OTOH, the American people REELECTED George W. Bush, that "buffoon" that you libs hate. Hmmmmm. Must be a bunch of Limbaugh listeners, like 53 million or so!

I'd rather listen to Rush Limbaugh than Michael Moore or Move On dot Org. But of course, lots of people listen to Limbaugh! The fact that you don't like him is irrelevant. He's making a fortune and doesn't coerce anybody to listen.

Have a great Memorial Day Weekend!

 

[cute fuzzy bunny]

Hmm, so if carter was responsible for the interest and inflation problems then, surely GWB is responsible for the bear market, 9/11, and all the other bad stuff that happened after he was elected

Face it, the president has very little to do with macroscopic happenings. If they were in office for 15-20 years, and concurrently had a supported majority in congress and local government they might. But maybe not having that is simply protecting us from someone really screwing it up.

That having been said, the iran hostage crisis was one of the worst demonstrations of weak leadership I've ever seen.

Reagan sure did a good job following that up by supporting Iraq, and the Mujahadeen in Afghanistan, aka the taliban...heck, we even gave Saddam the keys to the city of detroit for some charitable work he did, during RR's first year in office.

 

[laurence]

Lots of people beat there kids, lots of people don't save for retirement, lots of people are overwieght, how's the fact that lots of people do anything an endorsement of any kind? Rush preaches to the chior, and the fact that people are still willing to listen to him say throw drug users in jail yet he walks free shows this isn't about a reasoned debate, it's about bloodletting. Now the majority in congress wants to do away with the filibuster and make sure they can take over the judicial branch as well. Thank God my man McCain worked out a compromise to stave that off, probably at the cost of any chance at a Presidential nomination. As a moderate Repub I'm hated by by both sides now, and it depresses me to see how few people are interested making things better. We can shout "scoreboard" all we want, but the debt is out of control, Osama is still free, and Iraq is a low level civil war with 100,000 dead and counting.

I did like Reagan, but I was age 5 through 13 when he was President, it was more the fact he seemed like the grandpa we all wanted.

 

[cute fuzzy bunny]

How 'bout them fat low-savings wife beating hypocrites who take drugs with Osama? Hmm?

 

[Nords]

OTOH, the American people REELECTED George W. Bush, that "buffoon" that you libs hate.

Doesn't claiming a 2004 re-election imply that he had to win the 2000 election first?

 

[Mr._johngalt]

Doesn't claiming a 2004 re-election imply that he had to win the 2000 election first?

Some libs will never get over it. I am not surprised though.

JG

 

[Nords]

Some libs will never get over it.  I am not surprised though. JG

Hey, I'm no lib. I voted for Colin Powell AND John Kerry!

 

[windsurf]

Eagle 43: "Resist much. Obey little."

Do you think Edward Abbey would approve of your use of his motto?? Or, are you attributing that saying to someone else??