Taxes, War, and Wealth

Were rich Americans during the Korean War more patriotic than rich Americans today? Who knows? But they certainly paid a lot more in taxes to support the war effort than rich people today.

February 16 , 2007

By Sam Pizzigati

Last month, a veteran pundit with somewhat of an eccentric reputation proposed a novel strategy for ending the war in Iraq. Opponents of the war, columnist Nicholas von Hoffman urged, ought to press for a “Victory Over Terror” tax, a special levy that would subject all “incomes over $5 million” to a 20 percent surcharge “over and above what people in that rarified income bracket are already paying” in tax.

This surcharge, von Hoffman proposed, would expire only “when the war on terror is won or declared over,” giving the surcharged affluent — “most of whom carry a lot of weight at the White House” — a “powerful incentive to tell the President it is time to get a move on.”

No one on Capitol Hill, of course, took von Hoffman’s proposal seriously. He probably didn’t even take it seriously himself. How could he? The idea that rich people, in war-time, have a responsibility to pay significantly more in taxes sits far outside today’s political mainstream. Only someone hallucinating could believe that our current war-time Congress, even with a Democratic majority, would ever up taxes appreciably on the awesomely affluent.

How times have changed. A half century ago, the hallucinators would have been those who believed they could prevent, in war-time, a significant tax on rich people's incomes.

Indeed, if Congress were to follow von Hoffman’s advice and hike taxes on today’s richest by 20 percent, these financially fortunate Americans would still be paying — as a percent of their total incomes — less than half the federal income tax that America’s richest paid at the height of the Korean War.

Let's check the numbers. In 2004, the most recent year with IRS data available, just about 25,000 taxpayers — 24,440, to be exact — took home over $5 million. These taxpayers, after exploiting every loophole they could find, paid an average 21.9 percent of their incomes in federal income tax.

Back in 1952, at the height of the Korean War, the comparable federal tax bite on America’s richest 25,000 averaged 51.9 percent.

Those Korean War wealthy probably thought they were getting off easy — and they were. About a decade earlier, in the middle of World War II, the 25,000 highest-income taxpayers in the United States paid 68.4 percent of their incomes in federal income tax.

American popular culture today considers the generation that fought and won World War II the nation’s “greatest generation.” Americans all those decades ago took on great burdens — and shared them. Maybe that’s why they were great.

[Sources for the data in this analysis: For 2004 tax data, Internal Revenue Service Statistics of Income Tax Stats: Individual Statistical Tables by Size of Adjusted Gross Income. For the 1943 data, Fritz Scheuren and Janet McCubbin, Individual Income Tax Shares and Average Tax Rates, 1916-1950, Statistics of Income Bulletin, Volume 8, Number 3, Winter 1988-89. For the 1952 and 1967 data, Janet McCubbin and Fritz Scheuren,  Individual Income Tax Shares and Average Tax Rates, 1951-1986, Statistics of Income Bulletin, Volume 8, Number 4, Spring 1989. The “top 25,000” figures round off actual average rates paid by the highest 23,730 incomes in 1943, the highest 24,372 in 1952, the highest 27,066 in 1967, and the highest 24,440 in 2004.]

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Sam Pizzigati edits Too Much, an online weekly on excess and inequality.