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Investment Analysis Clubs / Macro Economic Trends and Risks
|Subject: Re: The Fiscal Cliff-Solving the wrong problem||Date: 11/14/2012 12:21 PM|
|Author: Hawkwin||Number: 408467 of 514384|
then how did the US economy do so well in the 1950s with a 90% top tax rate?
It is worth pointing out that in 1950, that top tax rate only applied to income over 1.8 million (adjusted for inflation).
Taxes were still very high on all other brackets.
As someone else mentioned, marginal rates is a non-starter. One has to look at effective rates.
I have not been able to find effective rates for the 50s but they exist for at least 1979 when the top tax rate was 70%.
Even then, the effective tax rate on the top quintile was only 27%.
The effective tax rate in 2009, with the marginals rates at only 36%, was 23% for the top quintile.
In other words, the difference between the 70% marginal rate in 1979 and the 36% marginal rate in 2009 was only 4% more effective taxes.
In summary, to say the economy did just fine under a 90% tax rate is a logical fallacy. We need to know what the effective rate was in order to start to do a more accurate comparison.
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