The Man in the Bottle
by David Atkins ("thereisnospoon")
Old TV episodes can serve as valuable history lessons. Digby regaled everyone with an instructive reminiscence on Stagecoach last month. Today, I'd like to share one from The Twilight Zone. In particular, the 1960 episode The Man in the Bottle.
A poor elderly woman visits Arthur Castle, an unsuccessful pawnbroker, bringing a wine bottle she found in a trash can. It has no value, but he buys it for a small amount out of pity. The bottle proves to contain a genie, who offers to grant four wishes to Castle and his wife. They use their first wish to repair a broken glass cabinet, proving the genie's power, and then receive a million dollars in cash upon making their second wish. After they have given tens of thousands away to their friends, an IRS employee visits the shop and presents the Castles with a tax bill that leaves them with only $5 once they pay it.
The episode continues with the man's wish for power, after which he is predictably turned into Adolf Hitler, and ends with his wish to return things to the way they were. It's a classic morality tale in the style of the Monkey's Paw.
But the instructive part is this: the tax bill the Castles get from the IRS on their $1 million windfall from the genie is $907,000, plus $35,000 in state income tax. Why is that number familiar? Because in 1960 when the episode was made, the marginal tax rate was 91%.
Over the last 40 years, the U.S. federal tax system has undergone three striking changes, each of which seems to move the federal tax system in the direction of less progressivity. First, there has been a dramatic decline in top marginal individual income tax rates. In the early 1960s, the statutory individual income tax rate applied to the marginal dollar of the highest incomes was 91 percent.
Keep in mind that this tax rate would have been completely normal to a 1960 audience. Today it seems bizarre to us--so bizarre, in fact, that modern viewers refuse to even believe it. Check out this TV.com user review:
The "punch line" of this particular episode is that all of the wishes granted to Mr. Castle come with some terrible consequence. This begins with an IRS agent spoiling the Castle's wish for $1,000,000 with a $902,000 income tax bill. This is a rate of over 90%, a rate so high as to make the word "absurd" inadequate. At current rates, a married couple would owe approximately $322,000 of income tax on a $1,000,000 income, and, while rates were certainly different in 1960, they were not 300% higher...
Were the tax rate to be at 50% rather than 40, or 60% rather than 50, it could be forgiven. Viewers would take little notice of such an inflation. However, no person watching the program can fail to notice the absurdity of a 90% tax rate. The ordinary is no longer ordinary, shattering the very principle that made the show great. While the story is engaging enough to maintain the viewer's interest, the entire punch line (and second half of the episode) is based upon something transparently contrived and false, making what is ordinarily the magic of the Twilight Zone simply... ordinary.
No, my dear reviewer. It is you who are mistaken...about a great many things. That 90% tax rate on a million dollar windfall was as American as Mom and Apple Pie at the time. As American as the transparent villainy of that banker in Stagecoach, whose rightwing talking points so common today were seen back then for the garbage that they were.
Remember that America circa 1960 is the America the Tea Party crowd desperately wants to "take their country" back to, even as they wail about being overtaxed at modern rates . One wonders if they even remember what patriotism and being a real American even meant back then.
Watch the whole episode split into two sections below. The key scene occurs at the end of the first clip and the beginning of the second.
If I had four wishes from a genie, I might wish that the Tea Party's billionaire funders like Charles and David Koch really did get their country back. All the way back to that magical time in 1960 when they were taxed at the rates they owe, to the country that gave them the opportunity to have such massive wealth.
Update: As several commenters have pointed out, the tax rate would not be quite as high as the episode suggests, since that 91% is a marginal rate on every dollar over $400,000 filed jointly (see page 6 for the tax table.) That would amount to $569,000 on the $600,000 of income between $400,000 and $1 million, plus a somewhat lower but still hefty tax rate on the first $400,000. So while the total tax would not actually reach $907,000, it would come very close. And yes, then as now there were a number of loopholes that the wealthy would use to evade their obligations, lowering the effective rate. But that's part of why those high effective rates are so important: they keep the effective rates substantial even after all the loopholes are abused.
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