↑ NewsThink.org

Post war debt

The national debt caused by World War II reached 119 percent of the nation's Gross Domestic Product (GDP) in 1946. Congress had raised the Federal Individual Income Tax rates at the start of the war to help pay for the cost of the war and the repayment of the war bonds that it had sold. The income tax rate for the wealthiest taxpayers was over 90 percent. This allowed the government to collect enough tax revenue to pay down much of the debt quickly after the war ended.

From WWII until the Reagan administration, the debt was reduced regardless of the party in power and in spite of expensive government projects, such as:

Three expensive wars were fought during this time: the Korean War, the Vietnam War, and the Cold War.

We paid for these expensive projects and wars as well as reduce the national debt because the tax rates on the wealthy and corporations were high enough to ensure we had the revenue we needed.

The highest marginal tax rate was nominally 91 percent from World War II to 1963. The national debt diminished rapidly during this time. The tax rate was lowered to 70 percent in 1965 during the Johnson administration. The national debt still diminished but less rapidly. But this would end in the 1980s.