Were taxes higher in 1948?
Math is hard. To make it simple, talking heads like Krugman like to say things like (yes, I'm putting words in his mouth) "The tax rate in 1948 was 82% on the richest Americans and only 33% today. For people with taxable income up to $4,000 it was 16%. Today your first $12,000 of taxable income is only 10%."
See how easy that is! I've just convinced you that rich people payed a lot more than they do today, and the average Joe contributed far more than you do today. So get off the "TEA Party Express" and pay your fair share. And please do NOT look into these numbers, because if you do you'll discover some problems.
For one, the average income in 1948 was $3,120 (SOURCE). There was a standard 10% deduction for those not itemizing (those itemizing could subtract union dues, high health care costs, work clothes, etc.). Lets assume you took the 10% because if you itemized lower than 10%, you would be an idiot not to take the 10%. Your taxable income dropped $312 to $2,808. Now we get to the tricky part - each family is different, and you were allowed a standard deduction was $600 per person. A signle person would only deduct $600, but lets assume a "Beaver" home (stay at home Mom and two kids). So a family of four, being supported on the average income automatically removed another $2,400 from their taxable income. This now drops their Federal taxable income to $408. At 16% they paid $65.28 (or 2.09% of their gross wages).
Fast forward to 2010. The average wage was $26,364 (SOURCE). File a tax form as married, with two children, and you get a standard deduction of $16,200. Your taxable income is $10,164. At 10% you pay $1,016 in Federal taxable income, or 3.85%.
"So what?", Krugman responds hypothetically. "The Federal government is taken a larger bite out of the average wage earners pocket, but 2% versus 4% isn't going to break the average Joe. Plus he gets to drive on all those nicely paved Eisenhower freeways that didn't even exist in 1948!"
Let's forget the Krugman is a believer in global warming and just argued that driving from New York to California is a great societal leap, he loves to ignore inflation. That average 1948 family had $3054.72 left over after Federal Taxes. In 2010 money, assuming the gov't inflation numbers are correct (and they're NOT), $3,054.72 is worth $27,639 (SOURCE). That means that an average wage earner in 1948 is left with $2,021 MORE than his current counterpart.
We haven't even TOUCHED the fact that the average worker today pays considerably higher sales taxes, state and local taxes, property taxes (passed on to renters in the form of higher rent) and car registration fees, etc. We'll stick with just the Federal Income tax for Mr. Krugman's benefit.
"But wait?", you say "Haven't there been EXTREME productivity increases in worker output in the past 60+ years? And if so, don't those translate into a LOWER cost of living? How can it be that the average American worker has LESS today than his post WWII counterpart? " You may want to read this blog for the answer.
We'll tackle the "Rich Question" posed above in our next blog.