12 Nov '10 08:26>
Time to deal with this fiction about high top tax rates producing prosperity. The whole argument is nothing more than socialist wishful thinking because the top-tax bracket cut point hasn’t generally been inflation-adjusted. So while top tax rates have varied, what matters much more is that the definition of who is "rich" has steadily broadened.
From 1913 to 1965 one needed at least $1 million in 2009 inflation-adjusted dollars to pay the top rate.
From 1965-1980 – with top tax rates in the 70% range – inflation kept working away on the top bracket until by the early 1980's the 70% tax was on income over $500,000 in 2009 dollars (i.e. bracket creep). Fifteen years of “super” tax rates were a key contributing factor to the misery of the 1970's -- 10 years of low growth and high unemployment.
Then we woke up and realized that a society does not tax its way to prosperity. Starting under Reagan, tax rates finally began to drop until in the years 1988-90, the US got as close as we would get to a flat tax rate – 15% or 28% for everyone. These tax rates ushered in the 1990s which was the longest period of growth in American history. Even though the top bracket continued dropping, this became less important as the rates flattened.
Here are a few data points from http://www.truthandpolitics.org/top-rates.php adjusted for inflation per http://www.westegg.com/inflation/:
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Years…………………..Top Tax Rate……….Nominal Top Bracket………in 2009 dollars
1917-21……………….. 67-73%.....................$1-2 million……………….$12-24 million
1930's…………………….60-80%......................$1-5 million…………….$16-76 million
1942……………………….88%...........................$200,000…………………$3 million
1950-63………………….90%...........................$400,000…………………$3.5 million
1965………………………70%...........................$200,000…………..……$1.3 million.
1981………………...….70%............................$200,000………………..$500,000
1982………………………50%....................... ....$106,000…………………$230,000
1988-90…………………28%...................... ....$30,000…………………..$50,000
1992……………………….31%...........................$86,500………………...$130,000
since…………… between 28-40%...........................................roughly $350,000
So the lesson is clear. Low taxes means a prosperous economy with low unemployment. High taxes means a stagnant economy with high unemployment which no amount of government spending can fix (in fact only makes worse). So increasing taxes on “the rich” with something disasterous like 50% on income over $250,000 would take us right back in the direction of another lost decade like the 1970's.
Dumb idea.
From 1913 to 1965 one needed at least $1 million in 2009 inflation-adjusted dollars to pay the top rate.
From 1965-1980 – with top tax rates in the 70% range – inflation kept working away on the top bracket until by the early 1980's the 70% tax was on income over $500,000 in 2009 dollars (i.e. bracket creep). Fifteen years of “super” tax rates were a key contributing factor to the misery of the 1970's -- 10 years of low growth and high unemployment.
Then we woke up and realized that a society does not tax its way to prosperity. Starting under Reagan, tax rates finally began to drop until in the years 1988-90, the US got as close as we would get to a flat tax rate – 15% or 28% for everyone. These tax rates ushered in the 1990s which was the longest period of growth in American history. Even though the top bracket continued dropping, this became less important as the rates flattened.
Here are a few data points from http://www.truthandpolitics.org/top-rates.php adjusted for inflation per http://www.westegg.com/inflation/:
-----------
Years…………………..Top Tax Rate……….Nominal Top Bracket………in 2009 dollars
1917-21……………….. 67-73%.....................$1-2 million……………….$12-24 million
1930's…………………….60-80%......................$1-5 million…………….$16-76 million
1942……………………….88%...........................$200,000…………………$3 million
1950-63………………….90%...........................$400,000…………………$3.5 million
1965………………………70%...........................$200,000…………..……$1.3 million.
1981………………...….70%............................$200,000………………..$500,000
1982………………………50%....................... ....$106,000…………………$230,000
1988-90…………………28%...................... ....$30,000…………………..$50,000
1992……………………….31%...........................$86,500………………...$130,000
since…………… between 28-40%...........................................roughly $350,000
So the lesson is clear. Low taxes means a prosperous economy with low unemployment. High taxes means a stagnant economy with high unemployment which no amount of government spending can fix (in fact only makes worse). So increasing taxes on “the rich” with something disasterous like 50% on income over $250,000 would take us right back in the direction of another lost decade like the 1970's.
Dumb idea.