Paul Krugman says America can still prosper even with a 91% top marginal tax rate:
Consider the question of tax rates on the wealthy. The modern American right, and much of the alleged center, is obsessed with the notion that low tax rates at the top are essential to growth.
Yet in the 1950s incomes in the top bracket faced a marginal tax rate of 91, that’s right, 91 percent, while taxes on corporate profits were twice as large, relative to national income, as in recent years. The best estimates suggest that circa 1960 the top 0.01 percent of Americans paid an effective federal tax rate of more than 70 percent, twice what they pay today.
America in the 1950s made the rich pay their fair share…..yet contrary to right-wing propaganda then and now, it prospered. And we can do that again.
Someone who might disagree with Krugman, someone who was actually responsible for tax policy in that era, might disagree. John F. Kennedy believed tax rates were too high in the 1950′s and early 1960′s and proposed dramatic tax cuts to spur economic growth and, says Kennedy himself, eventually higher tax revenues (via Mark Perry):
“An economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits,” said Kennedy in 1962 during an address to the Economic Club of New York.
Kennedy didn’t get his tax cuts through in 1963, and was assassinated before he could try again, but his successor Lyndon Johnson did get a roughly 20% across-the-board reduction in federal income tax rates through the Revenue Act of 1964. The tax cuts reduced top marginal rate from 91% to 70% and reduced corporate tax rate from 52% to 48%.
The economic impact of the tax cuts was dramatic. The unemployment rate fell from 5.2% in 1964 to 3.8% in 1966, and tax revenues soared from $94 billion in 1961 to $153 billion in 1968.
In other words, the Kennedy/Johnson tax cuts in the 1960′s had exactly the economic impact conservatives say tax cuts will have. And enacting any sort of tax hike now will have the opposite effect. It will restrict economic growth, restrict prosperity and restrict tax revenues.