You may have noticed that I haven’t posted on the brouhaha about claims about tax rates in the 1960s which has drawn in not just newly-elected Congressional representatives but Paul Krugman. I have the utmost of respect for Paul Krugman as an economist but much less in his political judgments and, let’s face it, politically he’s a weathervane. Whether he supports or opposes something depends on what the prevailing wisdom among the Democratic leadership is at any given time.
The reason I haven’t posted on it is that there are so many things being said that are untrue or half-truths it’s hard to know where to begin. The top marginal tax rate in 1960 wasn’t 70% it was 91%. Only a handful of families paid it—something like the top .002% IIRC. Those paying a rate of 70% weren’t a lot more numerous. Something like the the top .01% of income earners.
And—a key point—the effective tax rates being paid were about the same as today. What Americans have been willing to pay in taxes has been tremendously persistent over time, not just the last ten or twenty years but for at least the last 80 years or even longer.
The bottom line is a top marginal rate of 70% would be very, very difficult politically to effect and it won’t bring in nearly as much as either the proponents or foes are claiming. Try again.
One final word, something I’ve mentioned before. In 1960 the top 1% of income earners held 9% of wealth. Today they have 40%. Opinions can differ but I don’t think that’s due to unions, tax rates, or the inherent gifts of the top 1% of income earners. I think the change is due to a web of government policies that include tax policy, trade policy, immigration policy, and many, many others. I don’t think we can maintain a society of social equality in the presence of such stark inequality in wealth. Maybe I’m wrong. We’ve spent 80 years weaving that web of policies and it will take us at least that long to unweave them, its beneficiaries fighting to the death every step of the way.