Thread by @dcpetterson

Let's take a quick look at top tax rates during the heyday of US economic growth--the 1950s and 1960s--when the US middle class grew, America became the dominant economic power in the world, corporations prospered, we build the interstate highways and went to the Moon.

1/19

First, there's the corporate tax rate. The statutory rate is higher than the effective rate, of course (I'll address that shortly), but in the 50s and 60s, corporations paid in the range of roughly 40 to 50 percent.

It's now half that--21%

2/19

How about the estate tax? (It's also called "inheritance tax". Republicans call it "death tax".) In the heyday of the 50s-60s, the top estate tax rate for the biggest estates was between 70% and 92%. It's now 40%--on estates over $1 million.

3/19

Top capital gains tax rates--the taxes you pay when investments like stocks make money--were 25% in the 50s and 60s, rose to 40% in the late 70s, and are now about 15%.

4/19

Top marginal income tax rate in the 1950s and 60s was around 90% (on very large incomes). It's now 37% on incomes over about a half million dollars.

5/19

For most of these tax rates there are two important caveats:

1) the top marginal rates apply only to that portion of income over some limit (as I've mentioned in a few cases)

2) "effective" rates are lower than the stated statutory rates, for reasons I'll explain.

6/19

All of the above forms of federal taxation have exemptions and credits--that is, the tax actually owed can be reduced if the taxpayer does certain things.

You've all experienced exemptions and deductions in regard to income taxes, for instance.

7/19

To a great extent, these exemptions, deductions, and credits are intended to encourage or discourage certain activities. For example, charitable giving is deductible on your income taxes, which is done to encourage charitable giving.

8/19

The cost of paying employees is deductible from corporate income, which is done to encourage corporations to hire and pay employees.

And so on.

Okay, so what can we see from all this?

I draw two initial conclusions.

9/19

1) Federal taxes of almost all kinds are today at historic (even absurd) lows.

2) Federal taxes ON WEALTHY PEOPLE of almost all kinds were far higher--most were at record highs--in the economic heydays of the 1950s and 1960s.

10/19

I concentrated on the top marginal rates in the above graphs. Here's a comparison of the highest and lowest tax brackets 1915 to early 2010's. Lower and middle-income people have not fared nearly as well as the extremely wealthy since the 1950s.

11/19

As for the other forms of taxation--corporate taxes, estate taxes, capital gains taxes--lower and middle income people usually don't pay those taxes =at all=, so only the extremely wealthy have benefitted from lowering rates on those taxes.

12/19

We can add three further conclusions:

1) Republican tax cuts have almost exclusively benefitted the extremely rich.

2) Republican calls to further lower taxes will only benefit the extremely rich.

And, most importantly:

13/19

3) Since the American economy was better when top marginal rates were higher, there is no economic justification for further reducing tax rates. In fact, there's a good argument for substantially =raising= top marginal rates.

14/19

Why did America do better when the rich had higher marginal rates? At least three reasons:

1) The vast majority of Americans--the middle- and lower-income 90% of America--paid lower taxes than they do now, so they had more money to spend. ALL economies are demand-driven.

15/19

2) Higher top rates meant higher federal income, so America could afford big investments (like the interstate highway system as just one example) that benefited everyone and increased economic activity.

16/19

3) Of course, wealthy people didn't pay top marginal rates. They reduced their taxes through taking advantage of deductions in the tax code. THAT WAS ON PURPOSE, because it encouraged certain behaviors--like hiring and paying workers--that further stimulated the economy.

17/19

In short, rightist economic arguments against higher taxes on rich people and corporations, and arguments to eliminate deductions, are (to use the technical term) bullshit.

Tax deductions aren't Bad Things. It's how we make corporations and rich people into good citizens.

18/19

Conclusion: Don't lower taxes any further. In fact, raise them. A lot. Top marginal rates, anyway.

And judiciously reinstate deductions and exemptions and tax credits designed to force good corporate behavior.

.

Thank you for coming to my Ted Talk.

19/19

CORRECTION
In tweet 3/19, I used the wrong graph for estate taxes. Here's the correct one. Top estate tax rate was close to 80% in the 50s and 60s, and is now 40%.

The numbers are different than I had, but the principle is the same--record highs in the heyday, far lower mow.

Republicans want to completely eliminate estate taxes, cap gains, and corporate taxes.

I wonder why?

I could write entire threads on estate taxes and capital gains taxes and explain why these taxes are far too low, and why it would benefit our economy for them to be much higher, and why Republicans want to eliminate them. Maybe I will sometime.

One of the many reasons America finds it so hard to compete on the world economic stage is that we don't tax our corporations enough.