I am not surprised by these numbers at all. Tax rates have been decreasing since 1964, and now those with higher incomes are used to the low taxes. Because of the length of the low taxes, those who qualify for the highest marginal income tax will not want to change. The tax rate is slightly higher than what it was in the late 80's early 90's. However I don't see a possibility of the rates getting back to what they were in the 50's.
The two largest drops in the last half century occurred during two very different administrations. I think we could all guess that Reagan significantly lowered the tax rates on the top, but I did not expect the drop of 14% under LBJ. Sometimes I question the difference between Southern Democrats and moderate Republicans
I think international comparisons are also interesting on this. As Piketty points out those 91% rates are basically the highest rates sustained for more than just a few years in any country.
I think it'll be interesting to see if whoever is elected president will raise those rates. It seems like "tax breaks for the rich" has been a central topic of discussion for many of the candidates in the race. Even Trump has suggested eliminating loopholes used by the very rich.
This would be more interesting if this were overplayed with different types of tax burdens over time. State/Local Taxes, Capital Gains, Sales Taxes, etc etc. I don't think this tells the whole story as the tax code is complicated. In any case, the marginal tax rate does not mean much by itself especially if there are different types of deductions that are available. These deductions also change over time.
I agree that we need to bring up the whole tax system, because if you believe in progressive taxation then it should be the system as a whole that is progressive. While the income tax is progressive, many other taxes are not. In particular sales and sin taxes are strikingly regressive. As Piketty points out in the book, the tax system overall is somewhat regressive at the top because of the difference in how wealthier people make their money, and not nearly as progressive as the income tax alone is. That's important to think about when making policy.
This reminded me of ncome inequality, u-shaped bridge shape, from the movie that we watched a couple of weeks ago. The highest marginal income tax rates and income distribution have an inverse relationship. As the highest marginal income tax rates increase, income inequality decreases and vice versa.
http://prospect.org/article/what-would-pigou-do Here's an article with the graph!
The 7% rate from 1913-1915 is insane. I wonder what the reaction of the wealthy was in 1917 when the rates soared to 65%. I would also be interested to see the percentage of that rate actually paid after deductions. I wonder the percentage actually paid by the wealthy when rates were that high. Do you think it would be more or less?
It is surprised to me how the marginal tax rates fluctuate from 7% to 90%s. I believed that current rate, 30%s, is still high, but I wonder how people in 1940s would feel when their tax rates are almost 90%. This table also shows how the war is economically drying out people's wealth.
I agree with Lucas I also think that it will be interesting to see what happens to tax rates under our next President, particularly if that is Trump. While he may want to eliminate tax loopholes for the very rich and get rid of some of the tax breaks, I do cannot see him increasing tax rates, especially considering he is in the very top of the 1 percent. Also I think Kenny brings up an interesting point, this data does not present the full story because their are many other types of taxes that should be accounted for.
I am not surprised by these numbers at all. Tax rates have been decreasing since 1964, and now those with higher incomes are used to the low taxes. Because of the length of the low taxes, those who qualify for the highest marginal income tax will not want to change. The tax rate is slightly higher than what it was in the late 80's early 90's. However I don't see a possibility of the rates getting back to what they were in the 50's.
ReplyDeleteThe two largest drops in the last half century occurred during two very different administrations. I think we could all guess that Reagan significantly lowered the tax rates on the top, but I did not expect the drop of 14% under LBJ. Sometimes I question the difference between Southern Democrats and moderate Republicans
ReplyDeleteI think international comparisons are also interesting on this. As Piketty points out those 91% rates are basically the highest rates sustained for more than just a few years in any country.
ReplyDeleteI think it'll be interesting to see if whoever is elected president will raise those rates. It seems like "tax breaks for the rich" has been a central topic of discussion for many of the candidates in the race. Even Trump has suggested eliminating loopholes used by the very rich.
ReplyDeleteThis would be more interesting if this were overplayed with different types of tax burdens over time. State/Local Taxes, Capital Gains, Sales Taxes, etc etc. I don't think this tells the whole story as the tax code is complicated. In any case, the marginal tax rate does not mean much by itself especially if there are different types of deductions that are available. These deductions also change over time.
ReplyDeleteI agree that we need to bring up the whole tax system, because if you believe in progressive taxation then it should be the system as a whole that is progressive. While the income tax is progressive, many other taxes are not. In particular sales and sin taxes are strikingly regressive. As Piketty points out in the book, the tax system overall is somewhat regressive at the top because of the difference in how wealthier people make their money, and not nearly as progressive as the income tax alone is. That's important to think about when making policy.
DeleteThis reminded me of ncome inequality, u-shaped bridge shape, from the movie that we watched a couple of weeks ago. The highest marginal income tax rates and income distribution have an inverse relationship. As the highest marginal income tax rates increase, income inequality decreases and vice versa.
ReplyDeletehttp://prospect.org/article/what-would-pigou-do
Here's an article with the graph!
The 7% rate from 1913-1915 is insane. I wonder what the reaction of the wealthy was in 1917 when the rates soared to 65%. I would also be interested to see the percentage of that rate actually paid after deductions. I wonder the percentage actually paid by the wealthy when rates were that high. Do you think it would be more or less?
ReplyDeleteIt is surprised to me how the marginal tax rates fluctuate from 7% to 90%s. I believed that current rate, 30%s, is still high, but I wonder how people in 1940s would feel when their tax rates are almost 90%. This table also shows how the war is economically drying out people's wealth.
ReplyDeleteI agree with Lucas I also think that it will be interesting to see what happens to tax rates under our next President, particularly if that is Trump. While he may want to eliminate tax loopholes for the very rich and get rid of some of the tax breaks, I do cannot see him increasing tax rates, especially considering he is in the very top of the 1 percent. Also I think Kenny brings up an interesting point, this data does not present the full story because their are many other types of taxes that should be accounted for.
ReplyDelete