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While some "liberal pundits" have suggested the United States set 2013 tax rates for the rich back to the high rates of the 1950s, renowned economist Peter Schiff says that would simply result in the rich paying less than they do now.
Such prominent figures as investing guru Warren Buffett and The New York Times columnist Paul Krugman recently have made the argument that since the U.S. economy of the 1950s was booming despite high tax rates on the rich, tackling the fiscal cliff by raising taxes on the wealthy in 2013 should do no harm - and could actually help the economy.
Schiff, the CEO and chief global strategist of Euro Pacific Capital, says those who think we should adopt anything like the high 1950s-style tax rates - the top marginal rate was 91%, nearly triple today's 35% - haven't studied the whole picture.
"There's a myth out there propagated by people like Warren Buffett that the rich used to pay much higher rates of tax than they do today. The truth is the opposite," Schiff said Friday in a Daily Ticker video interview.
Schiff, who is best known for predicting the collapse of the housing bubble and the 2008 financial crisis in his 2007 book "Crash Proof," explained that differences in the tax code from the 1950s reach far beyond just the tax rates.
"Back in the 1950s there was only one kind of income; now there's three," Schiff said, noting that today income earned from work is treated differently than capital gains from stocks or passive income such as dividends.
"Back then income was income. You could deduct losses in one category from gains in another category. Today you cannot do that," Schiff said.
The rich were familiar with, and made use of, a wide variety of tax shelters in that era - many of which were eliminated in the 1980s.
As a result, the wealthy of the 1950s were not paying at the levels suggested by the stratospheric tax rates of the era, Schiff said.
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