[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-1-en-105":3,"doc-seo-301308-105":53,"doc-detail-301308-en":126},{"code":4,"msg":5,"data":6},0,"success",[7,14,19,24,29,34,39,44,49],{"id":8,"doc_module":9,"doc_module_name":10,"category_name":11,"show_sort_weight":12,"slug":13},11,1,"Template","Presentations",90,"presentations",{"id":15,"doc_module":9,"doc_module_name":10,"category_name":16,"show_sort_weight":17,"slug":18},12,"Resumes",80,"resumes",{"id":20,"doc_module":9,"doc_module_name":10,"category_name":21,"show_sort_weight":22,"slug":23},14,"Invoices",70,"invoices",{"id":25,"doc_module":9,"doc_module_name":10,"category_name":26,"show_sort_weight":27,"slug":28},15,"Posters",60,"posters",{"id":30,"doc_module":9,"doc_module_name":10,"category_name":31,"show_sort_weight":32,"slug":33},16,"Social Media",50,"social-media",{"id":35,"doc_module":9,"doc_module_name":10,"category_name":36,"show_sort_weight":37,"slug":38},17,"Forms",40,"forms",{"id":40,"doc_module":9,"doc_module_name":10,"category_name":41,"show_sort_weight":42,"slug":43},18,"Letters",30,"letters",{"id":45,"doc_module":9,"doc_module_name":10,"category_name":46,"show_sort_weight":47,"slug":48},21,"Paper Templates",5,"papers-templates",{"id":50,"doc_module":9,"doc_module_name":10,"category_name":51,"show_sort_weight":4,"slug":52},158,"General","general-158",{"code":4,"msg":54,"data":55},"ok",{"site_id":56,"language":57,"slug":58,"title":59,"keywords":60,"description":61,"schema_data":62,"social_meta":119,"head_meta":121,"extra_data":123,"updated_unix":125},105,"en","the-real-lesson-of-70-percent-tax-rates-on-entrepreneurial-income","The Real Lesson of 70 Percent Tax Rates on Entrepreneurial Income","","The document analyzes how marginal individual tax rates shaped the reporting of entrepreneurial income and perceived inequality from 1930 through later decades. It argues that high personal tax rates between 1950 and 1980 pushed entrepreneurial business income from individual returns into corporate filings, creating an illusion of reduced inequality. It then explains the reversal in the 1980s as individual rates fell below corporate rates and partnership and S-corporation restrictions eased, expanding pass-through businesses and shifting income onto 1040 forms.",{"@graph":63,"@context":118},[64,80,101],{"@type":65,"itemListElement":66},"BreadcrumbList",[67,71,74,77],{"item":68,"name":69,"@type":70,"position":9},"https://docshare.wps.com","Home","ListItem",{"item":72,"name":10,"@type":70,"position":73},"https://docshare.wps.com/template/",2,{"item":75,"name":51,"@type":70,"position":76},"https://docshare.wps.com/template/general/",3,{"item":78,"name":59,"@type":70,"position":79},"https://docshare.wps.com/template/the-real-lesson-of-70-percent-tax-rates-on-entrepreneurial-income/301308/",4,{"url":78,"name":59,"@type":81,"image":82,"author":87,"headline":59,"publisher":90,"fileFormat":93,"inLanguage":57,"description":61,"dateModified":94,"datePublished":95,"encodingFormat":93,"isAccessibleForFree":96,"interactionStatistic":97},"DigitalDocument",{"url":83,"@type":84,"width":85,"height":86},"https://docshare.wps.com/thumbnails/the-real-lesson-of-70-percent-tax-rates-on-entrepreneurial-income/301308.png","ImageObject",442,249,{"name":88,"@type":89},"Connor ","Person",{"url":68,"name":91,"@type":92},"DocShare","Organization","application/pdf","2026-09-23","2026-09-19",true,{"@type":98,"interactionType":99,"userInteractionCount":76},"InteractionCounter",{"@type":100},"ViewAction",{"@type":102,"mainEntity":103},"FAQPage",[104,110,114],{"name":105,"@type":106,"acceptedAnswer":107},"What does the document identify as the main mechanism behind changes in reported inequality?","Question",{"text":108,"@type":109},"It argues that high individual tax rates largely shifted entrepreneurial business income from individual income tax returns to the corporate income tax system, altering how income was reported rather than how wealth existed.","Answer",{"name":111,"@type":106,"acceptedAnswer":112},"How does the document explain the reversal during the 1980s?",{"text":113,"@type":109},"It states that when top individual income tax rates fell below corporate rates and restrictions affecting partnerships and S corporations eased, pass-through businesses expanded and income began appearing on individual returns.",{"name":115,"@type":106,"acceptedAnswer":116},"Why can focusing only on individual tax data lead to misjudging inequality historically?",{"text":117,"@type":109},"Because income composition changes can mask true income patterns: rich taxpayers may change how income is structured and reported, so measured inequality can reflect accounting shifts instead of real distribution changes.","https://schema.org",{"og:url":78,"og:type":120,"og:title":59,"og:site_name":91,"og:description":61},"article",{"robots":122,"canonical":78},"index,follow",{"doc_id":124,"site_id":56},301308,1789780951,{"code":4,"msg":5,"data":127},{"doc_id":124,"user_id":128,"nickname":88,"user_avatar":129,"doc_module":9,"category_id":50,"category_name":51,"doc_title":59,"doc_description":61,"doc_content":130,"file_id":131,"file_url":132,"file_type":133,"file_size":134,"view_count":76,"is_deleted":4,"is_public":9,"is_downloadable":9,"audit_status":9,"page_count":135,"language":136,"language_code":57,"site_id":56,"html_lang":57,"table_of_contents":137,"faqs":138,"seo_title":139,"seo_description":61,"update_tm":125,"read_time":76},687207022233,"https://ap-avatar.wpscdn.com/davatar_155a257f0dc6eb9ab79c44ca47cae57d","FISCAL FACT No. 632 Feb. 2019  \nThe Real Lesson of 70 Percent Tax Rates on Entrepreneurial Income  \nScott A. Hodge  \nPresident  \nKey Findings  \n• Recent debates over income inequality have focused on the role of higher income tax rates during the 1930s through the 1980s. Some assert these higher rates reduced income inequality, relative to today, when income tax rates are significantly lower.  \n• These arguments fail to consider that the high individual tax rates from 1950 through 1980 largely drove entrepreneurial business income out of the individual income tax system and into the corporate income tax system.  \n• This phenomenon reversed itself during the 1980s when the top individual income tax rate fell below the corporate rate and restrictions on the structure and participation in partnerships and S corporations eased.  \n• These trends suggest that the high personal income rates from 1950 through 1980 simply encouraged the rich to modify the composition of their income. Their wealth was still there during this period, just not accounted for on individual tax returns. The shifting composition of income claimed by the rich due to changes in tax laws explains this illusion.  \n• Focusing solely on the individual income tax data leads to a misjudgment on the historic level of inequality.  \nThe Tax Foundation is the nation’s  \nleading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and local levels. We are a 501(c)(3) nonprofit organization.  \n©2019 Tax Foundation Distributed under  \nCreative Commons CC-BY-NC 4.0  \nEditor, Rachel Shuster Designer, Dan Carvajal  \nTax Foundation  \n1325 G Street, NW, Suite 950 Washington, DC 20005  \n202.464.6200  \n[taxfoundation.org](taxfoundation.org)  \nTAX FOUNDATION | 2  \nIntroduction  \nIn a recent essay1 in The New York Times, economists Emmanuel Saez and Gabriel Zucman argue that the 70 percent income tax rate proposed by freshman Rep. Alexandria Ocasio-Cortez (D-NY) is not about soaking the rich, it is about “regulating inequality and the market economy” and constraining“the immoderate, and especially unmerited, accumulation of riches.” Lastly, they say,“It is also about safeguarding democracy against oligarchy.”  \nThat is a lot to ask of any tax system. However, according to Saez and Zucman, the U. S. tax code achieved these objectives during the era from 1930 to 1980 when “the top marginal tax rate averaged 78 percent; it exceeded 90 percent from 1951 to 1963.” As a result, they say, the “United States came as close as any democratic country ever did to imposing a legal maximum income. The inequality of pretax income shrunk dramatically.”  \nThere is a considerable amount of debate whether these high income tax rates actually reduced inequality. One study cautioned that inequality studies based on tax return data are “biased by tax base changes and missing income sources.”2 A major factor to be considered is how the composition of reported income for the rich has changed over time in response to multiple changes in individual tax rates and the difference between those rates and the corporate tax rate.  \nAs we will see, the high individual tax rates from 1950 through 1980 largely drove entrepreneurial business income out of the individual income tax system and into the corporate income tax system. It is likely that there were no fewer rich people during those decades than today, but many of them simply sheltered their income in traditional C corporations, which faced considerably lower tax rates. It is likely that what Saez and Zucman see as a reduction in inequality during that era is merely the migration of business income from individual income tax forms and onto corporate tax forms.  \nThis phenomenon reversed itself during the 1980s when the top individual income tax rate fell below the corporate rate and the restrictions on the structure and participation in partnerships and S corporati","cbCairE8xbTeGsRm","https://ap.wps.com/l/cbCairE8xbTeGsRm","pdf",190306,7,"English","# Key Findings\n# Introduction\n## Debate on high-income tax rates and inequality\n## Income composition shifts and tax system changes\n# Saez’s Own Data Shows How High Tax Rates Impact Entrepreneurial Income","[{\"question\":\"What does the document identify as the main mechanism behind changes in reported inequality?\",\"answer\":\"It argues that high individual tax rates largely shifted entrepreneurial business income from individual income tax returns to the corporate income tax system, altering how income was reported rather than how wealth existed.\"},{\"question\":\"How does the document explain the reversal during the 1980s?\",\"answer\":\"It states that when top individual income tax rates fell below corporate rates and restrictions affecting partnerships and S corporations eased, pass-through businesses expanded and income began appearing on individual returns.\"},{\"question\":\"Why can focusing only on individual tax data lead to misjudging inequality historically?\",\"answer\":\"Because income composition changes can mask true income patterns: rich taxpayers may change how income is structured and reported, so measured inequality can reflect accounting shifts instead of real distribution changes.\"}]","The Real Lesson of 70 Percent Tax Rates on Entrepreneurial Income | PDF"]