Thursday, October 25, 2012

Lowest tax rates ever?

I'll continue with my schtick of providing historical context in the run-up to the election. If one gets enough of this context (both across countries and time), a number of the candidates' platforms seem quite silly. Tonight we show US top marginal income tax rates over time:



Now, if you go back even further you can find that income tax rates in the late 1920s were temporarily similar to those of today. So, essentially, we currently have tax rates at their lowest levels (save a few of the Bush 1 years) since before the Great Depression. In the 1920s, recall, we didn't have Medicare, Medicaid, Social Security, unemployment insurance, etc. So, if you hear someone complaining that our income tax rates are holding back small businesses or entrepreneurs, ask yourself: compared to when?

And, yes, you could argue and say that it's not just the top marginal rate that matters, but also the income at which the rate goes into effect. The fact that effect tax rates on the rich are at near all time lows, for example, is noted in this Poltifact piece: "for those in the top 0.01 percent of the income distribution, the effective tax rate was 71.4 percent in 1960, 74.6 percent in 1970, 59.3 percent in 1980, 35.4 percent in 1990, 40.8 percent in 2000 and 34.7 percent in 2004. If lower taxes did actually deliver economic growth, then our country should be booming! Also, is it any wonder we're having trouble paying for our social safety net with these kind of declining contributions?

4 comments:

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  2. Interesting post. 70 percent is an amazingly high amount! I think the very highest rates in Europe are around 50 - and you get a LOT of bang for your buck. Not that I think it is necessary to go that high, but I do think if America wants to have programs like social security and medicare then we should step up and fund them properly.

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  3. Thanks, Miss. If politicians promise benefits it's disingenuous not to pay for them.

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