Over the years I've been surprised many times by the general ignorance U.S. citizens have of how their top marginal tax rates have changed over the years. In particular, few people seem to know how much higher these rates were between the FDR and Reagan administrations. The chart below shows this very nicely (as usual, click to enlarge).
One that progressives like to make is that we have a lot of experience in economic boom times (say, the late '50s) with very high top marginal rates – therefore such rates are not the destroyer of jobs claimed by the conservatives. However, it is simultaneously true that the very wealthy back then had relatively easy access to tax shelters, and in fact very little income was actually taxed at that rate. The real world is messy and complicated.
An observation that conservatives like to make is the strong correllation between the dropping of tax rates and the subsequent ramping up of the economy (this happened both in the late '20s and early '90s). But progressives can point to other factors that influenced those economic upturns, including other roughly simultaneous changes in the regulatory environment. The real world is messy and complicated.
So be careful reading too much into the squiggles on this chart. Nonetheless it's a useful piece of any U.S. citizen's political education – no matter what one's political beliefs, this chart encapsulates the past century's history of one of the most significant consequences of elections: the setting of our tax rates...
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