(Community Matters) One would think today’s political debate is about confiscating property or reimposing the draconian 50% marginal tax rates from the 1980s, or the 70% rate from the 1970s, or the 90% rates from the 1950s and 60s (all historical rates shown below the jump). In fact, we’re talking about allowing a temporary (& ill conceived especially given that we simultaneously declared but didn’t pay for two wars) tax decrease on the wealthiest 1% of all Americans expire.
We’re talking about raising the marginal rate from 34% to 39% – a return to the historically very low marginal rates of the Clinton era. And, the wealthiest Americans with stock portfolios, business expenses, ROTH accounts, private ranches, oil & gas interests, etc, will still benefit from very generous IRS deductions, many which lower their effective tax rates to less than that of their administrative assistants.
As a reminder, the slight marginal rise in tax rates ushered in one of America’s most prosperous economic booms, during which the increase in value of property (whether real or personal – equity and real estate) more than made up for the slight tax increase on wealthier Americans.
A friend wrote me last week to alert me to the fact that his charitable giving would decrease if rates increased. And, this may be temporarily true – though I suspect when the value of the equities in his foundation’s stock portfolio increase in response to investors’ optimism, he’ll be giving more rather than less. Yet, even if the latter didn’t happen, all private philanthropy combined wouldn’t make up for draconian cuts in social services and education spending called for in the GOPs Pledge to America – in 2008 private philanthropy totaled $308 billion (over 1/3 going to religious institutions), while 2009 gov’t spending on education was more than $966 billion, on welfare more than $600 billion and was greater than $1 trillion on healthcare.
The slight increase in marginal rates for the wealthiest Americans will help right budget deficits and confidence in the US economy – increasing the value of assets and more than offsetting the increase in personal tax expense.
The chart above is the effective federal tax rate top1%. link
I find this graph of income disparities also telling:
Historical rates (married couples, filing jointly)
Table
| Tax year | Top marginal tax rate (%) |
Top marginal tax rate (%) on earned income, if different<1> |
Taxable income over– |
|---|---|---|---|
| 1913 | 7 | 500,000 | |
| 1914 | 7 | 500,000 | |
| 1915 | 7 | 500,000 | |
| 1916 | 15 | 2,000,000 | |
| 1917 | 67 | 2,000,000 | |
| 1918 | 77 | 1,000,000 | |
| 1919 | 73 | 1,000,000 | |
| 1920 | 73 | 1,000,000 | |
| 1921 | 73 | 1,000,000 | |
| 1922 | 58 | 200,000 | |
| 1923 | 43.5 | 200,000 | |
| 1924 | 46 | 500,000 | |
| 1925 | 25 | 100,000 | |
| 1926 | 25 | 100,000 | |
| 1927 | 25 | 100,000 | |
| 1928 | 25 | 100,000 | |
| 1929 | 24 | 100,000 | |
| 1930 | 25 | 100,000 | |
| 1931 | 25 | 100,000 | |
| 1932 | 63 | 1,000,000 | |
| 1933 | 63 | 1,000,000 | |
| 1934 | 63 | 1,000,000 | |
| 1935 | 63 | 1,000,000 | |
| 1936 | 79 | 5,000,000 | |
| 1937 | 79 | 5,000,000 | |
| 1938 | 79 | 5,000,000 | |
| 1939 | 79 | 5,000,000 | |
| 1940 | 81.1 | 5,000,000 | |
| 1941 | 81 | 5,000,000 | |
| 1942 | 88 | 200,000 | |
| 1943 | 88 | 200,000 | |
| 1944 | 94 <2> | 200,000 | |
| 1945 | 94 <2> | 200,000 | |
| 1946 | 86.45 <3> | 200,000 | |
| 1947 | 86.45 <3> | 200,000 | |
| 1948 | 82.13 <4> | 400,000 | |
| 1949 | 82.13 <4> | 400,000 | |
| 1950 | 84.36 | 400,000 | |
| 1951 | 91 <5> | 400,000 | |
| 1952 | 92 <6> | 400,000 | |
| 1953 | 92 <6> | 400,000 | |
| 1954 | 91 <7> | 400,000 | |
| 1955 | 91 <7> | 400,000 | |
| 1956 | 91 <7> | 400,000 | |
| 1957 | 91 <7> | 400,000 | |
| 1958 | 91 <7> | 400,000 | |
| 1959 | 91 <7> | 400,000 | |
| 1960 | 91 <7> | 400,000 | |
| 1961 | 91 <7> | 400,000 | |
| 1962 | 91 <7> | 400,000 | |
| 1963 | 91 <7> | 400,000 | |
| 1964 | 77 | 400,000 | |
| 1965 | 70 | 200,000 | |
| 1966 | 70 | 200,000 | |
| 1967 | 70 | 200,000 | |
| 1968 | 75.25 | 200,000 | |
| 1969 | 77 | 200,000 | |
| 1970 | 71.75 | 200,000 | |
| 1971 | 70 | 60 | 200,000 |
| 1972 | 70 | 50 | 200,000 |
| 1973 | 70 | 50 | 200,000 |
| 1974 | 70 | 50 | 200,000 |
| 1975 | 70 | 50 | 200,000 |
| 1976 | 70 | 50 | 200,000 |
| 1977 | 70 | 50 | 203,200 |
| 1978 | 70 | 50 | 203,200 |
| 1979 | 70 | 50 | 215,400 |
| 1980 | 70 | 50 | 215,400 |
| 1981 | 69.125 | 50 | 215,400 |
| 1982 | 50 | 85,600 | |
| 1983 | 50 | 109,400 | |
| 1984 | 50 | 162,400 | |
| 1985 | 50 | 169,020 | |
| 1986 | 50 | 175,250 | |
| 1987 | 38.5 | 90,000 | |
| 1988 | 28 <8> | 29,750 <8> | |
| 1989 | 28 <8> | 30,950 <8> | |
| 1990 | 28 <8> | 32,450 <8> | |
| 1991 | 31 | 82,150 | |
| 1992 | 31 | 86,500 | |
| 1993 | 39.6 | 89,150 | |
| 1994 | 39.6 | 250,000 | |
| 1995 | 39.6 | 256,500 | |
| 1996 | 39.6 | 263,750 | |
| 1997 | 39.6 | 271,050 | |
| 1998 | 39.6 | 278,450 | |
| 1999 | 39.6 | 283,150 | |
| 2000 | 39.6 | 288,350 | |
| 2001 | 39.1 | 297,350 | |
| 2002 | 38.6 | 307,050 | |
| 2003 | 35 | 311,950 |
Community Matters 