Gosh that's disappointing, I like Reich a lot but he's being quite disingenuous there -- he should know better.

The U.S. top tax bracket did hit 90% before JFK lowered it. But nobody actually _paid_ that rate, and the tax-shelter business was vastly more active and effective in 1961 than today. Indeed the federal law which governs private foundations, passed in 1969, was explicitly written to tighten up what both parties had since the late 1950s agreed was wide-open rampant abuse of foundations and trusts as tax dodges. (It took a number of years and several attempts to get consensus on the specifics of legislation.)

The proof of this came later when Reagan cut the top bracket from 70% to about half that, where it has stayed (roughly) ever since. If it is true that most top incomes were being hidden from the IRS then we'd expect to see a fast reduction in the number of top-bracket households who are employing elaborate tax dodges. That's because parking income away from the taxman is never without some cost in effort or money: no trust or tax-deductible investment loss or whatever is actually as rewarding or hassle-free as simply having the income to spend as one sees fit. As the top marginal rate goes down, hiding income from it becomes relatively less worth the trouble.

Therefore, if basically everyone in the 1950s was hiding top-bracket incomes from the IRS, then starting in the early 1980s we should see _less_ of that behavior. We should see the fraction of actual federal tax receipts that come from the highest-income households go _up_.

And that is in fact what happened. The IRS reports that the share of total federal income tax receipts coming from the top 1% of incomes rose from 19% in 1980 and 18% in 1981, to 25% in 1986 and 27.5% in 1988. Almost a 50% increase in just a few years (and it has stayed in that higher ballpark ever since). Apparently quite a few top-bracket incomes came in from the cold, as it were, when the top marginal rate was cut in half.

Today the wealthy pay _much_ higher effective federal tax rates than the poor or middle class. As of 2003 the top 1% of households by income had an effective rate of all federal taxes of 31%, compared to 25% for the top fifth or 14% for the middle fifth or 5% for the bottom fifth.
http://www.cbo.gov/ftpdocs/70xx/doc7000/12-29-FedTaxRates.pdf

A true effective tax rate would have to factor in state and local taxes as well, the property and sales taxes which are far less progressive than the federal income and capital-gains and corporate taxes. The best all-in-one estimates I've seen lately say that combining all levels of taxation, the true tax burden as a fraction of gross income is currently about even across all income quintiles. That makes the U.S. distinctly more progressive in taxation than Western Europe or Canada, which are much more dependent on large regressive sales taxes (the VAT) to fund all levels of government.

Reich said: In 1960, the moguls of America paid a marginal tax of 90 percent on their incomes, which translated into an effective rate -- after all deductions and credits -- of some 50 percent.

There's nothing disingenuous about that.

What is disingenous is offering an argument that claims the tax rates are flat across the quintiles and coming to the conclusion that that fits the definition of progressive.