Under Obama's Plan, The Wealthiest Americans Still Pay Less Taxes Than They Did Under Reagan

Posted on March 13, 2009 by Ampersand

A crystal-clear visual from Move On, who in turn got it from Steve Benen.

Also, Matthew Ygesias asks, why not add additional marginal brackets?

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17 Responses to Under Obama's Plan, The Wealthiest Americans Still Pay Less Taxes Than They Did Under Reagan

  1. Doug S. says:
    March 13, 2009 at 3:04 pm

    Interesting that the lowest tax levels on record were in the 1920s…

  2. sanabituranima says:
    March 13, 2009 at 3:36 pm

    Interesting that the lowest tax levels on record were in the 1920s…

    That can’t POSSIBLY be true, because everyone knows that low taes are good for the economy, the economy crashed after the 1920s. :P

  3. PG says:
    March 13, 2009 at 3:50 pm

    We didn’t have a peacetime federal income tax until 1913 (Lincoln instituted a federal income tax temporarily during the Civil War), and the top rate during WWI was 70%. It was one of the bizarre things about Bush — he kept saying we were at war, but didn’t tax like we were at war.

  4. Roger says:
    March 14, 2009 at 8:51 am

    Thanks for posting that. I also post about the tax system. I agree that adding higher tax brackets would be a good thing. I’m also a pragmatist. I know in this economy, for Obama and the Democrats to add those brackets, it would probably be fatal in the next elections. Just to roll them back to an earlier level took a lot of political courage.

  5. Fudged says:
    March 14, 2009 at 7:32 pm

    Reagan inherited an extremely high tax rate from Jimmy Carter. As soon as he could, he pushed the income tax way down – the top rate was only 28%, far less than today.

    That article is misleading.

  6. Ampersand says:
    March 14, 2009 at 8:34 pm

    Under Carter, the top tax rate was 70%. Reagan cut it to 50% as soon as he could.

    Then, for most of Reagan’s time in office, it was 50%, as the chart says. Reagan cut it down to 38% in 1987, and then 28% in 1988.

    Since it went down to 50% under Reagan, not Carter, and then stayed at 50% for most of Reagan’s term in office, it’s silly to say that Carter was the one who set that tax rate.

  7. PG says:
    March 14, 2009 at 10:41 pm

    I always like Krugman’s take on this: we had a 90% top marginal rate in the ’50s, but nobody thought Ike was a Commie.

  8. Jake Squid says:
    March 15, 2009 at 10:15 am

    I always like Krugman’s take on this: we had a 90% top marginal rate in the ’50s, but nobody thought Ike was a Commie.

    I’ve been saying this for years. It’s my most used counterargument to “taxes are too high at the top bracket.” It’s pretty effective because most of the people who would say that taxes are too high also think that the US Economy was at its all time high in the 50’s.

  9. sylphhead says:
    March 15, 2009 at 10:25 am

    I always like Krugman’s take on this: we had a 90% top marginal rate in the ’50s, but nobody thought Ike was a Commie.

    Yes, but the cap at which that top marginal rate applied was much higher. In inflation-adjusted terms, only income above 50 million USD in today’s terms was taxed at 90+% marginal rates. Nowadays, income tax progressivity maxes out at $250,000, making it little better than the payroll tax in terms of “progressive for a while, then regressive afterwards”. (And it really is regressive in effect, not merely “flat”, for a variety of reasons. For one thing, if you’re making $5 million a year in salary, chances are you’re also making $20 million a year through asset and stock holdings, which are covered by much lower taxes than the marginal income tax rate. On the other hand, a family that makes a combined $300,000 a year, though that definitely does make them “average Americans”, nevertheless relies mostly on salary income.)

    Raise the caps on both payroll and income taxes. It’s commonsensical and quickly restores a lot more progressivity to our tax system, without unwittingly shifting most of the burden to “dad’s a (GP) doctor, mom’s a (non-partner) lawyer” type households.

  10. sylphhead says:
    March 15, 2009 at 10:31 am

    Hmm, Jake, as for me I’m used to a more esoteric brand of economic conservative, the one who’ll say that the 50’s model – the one that produced three decades of broad-based prosperity, stability, and productivity gains – has been discredited by the economic troubles of the late 1970’s. Of course, other economic models that couldn’t get through one-tenth of that time span without creating the modern debt crisis aren’t bad in any way. Commie!

  11. Jake Squid says:
    March 15, 2009 at 11:26 am

    Then I envy you, sylphhead. I’ve been dealing w/ ignorant dittoheads, and worse, for nearly 13 years now. People w/ no desire to learn anything other than what their favorite talking head tells them to believe. For a while, I was actually handing out the graph of marginal tax rates so that they’d believe it was true. And that’s been ever right winger, save one (who I had great conversations with) for over a decade now. It’s been very depressing.

  12. Roger says:
    March 15, 2009 at 12:03 pm

    Then I envy you, sylphhead. I’ve been dealing w/ ignorant dittoheads, and worse, for nearly 13 years now. People w/ no desire to learn anything other than what their favorite talking head tells them to believe.

    I understand your pain. I live in the Atlanta area among large numbers of dittoheads and folks who worship Neal Boortz and his so-called “fair tax” plan. What an oxymoron that is.

  13. Jack Stephens says:
    March 16, 2009 at 4:08 am

    Regan = uber commie.

  14. PG says:
    March 27, 2009 at 10:59 am

    Something I didn’t know about how the 1986 tax reform, in which the top marginal rate was dropped to 28%, managed to be roughly revenue neutral:

    In the early 1980s, an I.R.S. research officer in Washington named John Szilagyi had seen enough random audits to know that some taxpayers were incorrectly claiming dependents for the sake of an exemption. Sometimes it was a genuine mistake (a divorced wife and husband making duplicate claims on their children), and sometimes the claims were comically fraudulent (Szilagyi recalls at least one dependent’s name listed as Fluffy, who was quite obviously a pet rather than a child).

    Szilagyi decided that the most efficient way to clean up this mess was to simply require taxpayers to list their children’s Social Security numbers. ”Initially, there was a lot of resistance to the idea,” says Szilagyi, now 66 and retired to Florida. ”The answer I got was that it was too much like ‘1984.”’ The idea never made its way out of the agency.

    A few years later, however, with Congress clamoring for more tax revenue, Szilagyi’s idea was dug up, rushed forward and put into law for tax year 1986. When the returns started coming in the following April, Szilagyi recalls, he and his bosses were shocked: seven million dependents had suddenly vanished from the tax rolls, some incalculable combination of real pets and phantom children. Szilagyi’s clever twist generated nearly $3 billion in revenues in a single year.

    Szilagyi’s immediate bosses felt he should get some kind of reward for his idea, but their superiors weren’t convinced. So Szilagyi called his congressman, whogot the reward process back on track. Finally, five years after his brainstorm became the law, Szilagyi, who earned about $80,000 annually at the time, was given a check for $25,000. By this point, his idea had generated roughly $14 billion.

  15. Dennis S. says:
    April 1, 2009 at 6:51 am

    Read this: http://www.heritage.org/research/taxes/wm327.cfm

    When tax rates are cut we all benefit. You can’t correct current problems by spending and taxing.

  16. Ampersand says:
    April 1, 2009 at 9:22 am

    Dennis, that paper opens by saying “There is a distinct pattern throughout American history: When tax rates are reduced, the economy’s growth rate improves and living standards increase.”

    Okay, stop a moment. Consider the situation right now. Did Bush’s tax cuts lead to an improved growth rate and an increase in living standards? More importantly, is the economy healthy overall?

    Compare this to what the economy looked like after eight years of Clinton (Clinton, as you will recall, raised taxes). Do you really think we’re in a better economic situation right now than we were in 2002?

    (The above chart is from 2004 — so it doesn’t even include the worse years of the economy under Bush.)


  17. Myca says:
    April 1, 2009 at 10:04 am

    Read this: http://www.heritage.org/research/taxes/wm327.cfm

    When tax rates are cut we all benefit. You can’t correct current problems by spending and taxing.

    Admit it, Dennis … you posted this on April 1 for a reason, right?

    —Myca

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