"Tax the Rich": The Policy Behind the Slogan

Ninety-one percent. That was the top marginal federal income tax rate on income above roughly $200,000 for most of the 1950s, through both of Dwight Eisenhower’s terms, touching 92 percent for two of those years. Today’s top rate is 37 percent. “Tax the rich” reads like a bumper sticker, but for three decades it was close to a description of the actual tax code, and the record behind both numbers, the 91 and the 37, is public.

The 91 percent bracket

The modern federal income tax started small. The Revenue Act of 1913 set a top rate of 7 percent, applied only to the highest incomes in the country. Two world wars pushed it up in stages, and by 1944, funding the second one, the top bracket reached 94 percent on income above $200,000. When the war ended, Congress did not undo the structure. The top rate held at 91 percent for 1950, 1951, and 1954 through 1959, and reached 92 percent in 1952 and 1953, all on that same $200,000 line, according to the Tax Foundation’s historical rate tables. A Republican administration ran the country for most of those years and left the bracket alone.

The honest asterisk on the number: almost nobody paid 91 percent of anything. The threshold, about $2 million in today’s dollars, caught fewer than 10,000 households a year, and even those households mostly avoided the top marginal rate through deductions, shelters, and income that was never reported as ordinary wages in the first place. The Tax Foundation’s own analysis puts the top 1 percent’s actual average federal income tax rate across the 1950s at about 16.9 percent. The 91 percent bracket was real law. The gap between that law and what people actually paid is also real, and it is most of the story.

Down to 37

The rate has moved several times since, mostly downward. The Revenue Act of 1964, the tax cut John Kennedy proposed and Lyndon Johnson signed after Kennedy’s assassination, cut the top rate from 91 to 70 percent, phased in through 1965. Ronald Reagan’s Economic Recovery Tax Act of 1981 dropped it to 50 percent, and the Tax Reform Act of 1986 cut it again, to 28 percent, effective for the 1988 tax year. It climbed back up to 39.6 percent under the American Taxpayer Relief Act of 2013, before the 2017 Tax Cuts and Jobs Act set today’s 37 percent, where it has stayed.

Taxing wealth instead of income

An income tax applies to what a person earns in a year. A wealth tax, the policy both Bernie Sanders and Elizabeth Warren ran on in the 2020 Democratic primary, applies to what a person already owns, every year, sold or not. Sanders’s 2019 plan started at 1 percent on a married couple’s net worth above $32 million, then rose in steps: 2 percent above $50 million, 3 percent above $250 million, 4 percent above $500 million, 5 percent above $1 billion, 6 percent above $2.5 billion, 7 percent above $5 billion, and 8 percent on everything above $10 billion, a structure the Tax Foundation estimated would reach the top 0.1 percent of American households. Warren’s Ultra-Millionaire Tax Act, introduced with Representatives Pramila Jayapal and Brendan Boyle in March 2021, aimed narrower: 2 percent a year on net worth between $50 million and $1 billion, and 3 percent total above $1 billion, on the top 0.05 percent of households. Warren’s office projected $3 trillion in revenue over ten years; the economists who costed Sanders’s plan, Emmanuel Saez and Gabriel Zucman, put its ten-year yield at $4.35 trillion. Neither bill passed. Alexandria Ocasio-Cortez raised a related but different idea on 60 Minutes on January 6, 2019: a 70 percent marginal rate on income above $10 million, not a wealth tax but the same logic behind the 1950s bracket, taxing the money after a certain point harder than the money before it.

Warren’s bill also tried to solve the problem a wealth tax runs into immediately: how does the IRS know what a private company or a stock portfolio is actually worth, and what stops an owner from moving both somewhere the tax cannot reach. Her text set a minimum audit rate of 30 percent for anyone subject to the tax and added a 40 percent exit tax on any US resident worth more than $50 million who renounces citizenship to get out from under it. Renouncing citizenship over a proposed tax is a real option for someone with $50 million; it is not one most workers have ever needed to consider.

What the leaked IRS files showed

In June 2021, ProPublica published leaked IRS data on thousands of the wealthiest Americans, reporting each person’s true tax rate: federal income tax actually paid, measured against how much their wealth grew, not against what they reported as taxable income. Between 2014 and 2018, the 25 richest Americans saw a combined $401 billion increase in wealth. Over that same span they paid $13.6 billion in federal income tax, combined, a true tax rate of 3.4 percent. Warren Buffett’s was the lowest of the 25: his wealth grew $24.3 billion in those years, and he paid $23.7 million in federal income tax, a true rate near 0.1 percent. Jeff Bezos paid no federal income tax at all in 2007 and again in 2011; across 2006 to 2018, as his fortune grew $127 billion, his true tax rate ran about 1.1 percent. Elon Musk paid nothing in 2018. None of it broke any law. Stock that has not been sold is not income under the tax code, so a fortune can add billions in a single year while the tax bill stays close to zero, which is the gap a wealth tax targets directly.

The 2021 dress

On September 13, 2021, Ocasio-Cortez wore a white gown to the Met Gala with “Tax the Rich” lettered in red across the back, designed by Aurora James. It put the same idea from her 2019 television remarks on a red carpet two and a half years later, spelled out this time instead of argued.

Who actually agrees

Gallup has asked Americans about “heavy taxes on the rich” since 1939, when only 35 percent approved. When Gallup asked again in 1998, 51 percent still disapproved. Majorities have backed it in most readings since 2013, including 52 percent in 2022, with Democratic approval near 70 to 79 percent and Republican approval near a quarter to a third. A February 2024 poll for Navigator Research, conducted by Global Strategy Group among 1,000 registered voters, found 79 percent supporting higher taxes on the rich outright, including 63 percent of Republicans. The slogan and the 1950s tax bracket sit on the same side of most polling taken since. Neither one became law.