Ah, that yearned-for 90% marginal tax rate.

I know that this (via College Insurrection) sounds self-evidently absurd:

Economists at the University of Pennsylvania and University of Bonn argue that the United States would be better off if well-heeled citizens paid the kind of high tax rates not seen since the Eisenhower administration.

According to a working paper by Bonn’s Fabian Kindermann and Penn’s Dirk Krueger published by the National Bureau of Economic Research, going back to the 1950s’ top marginal tax rate of 91 percent could be the elixir to cure the income inequality bug.

Krueger told the Huffington Post a rate “between 85 and 90 percent” makes everybody better off, including people in the 1 percent.

…but I have actually seen someone argue this with a straight face. I was in a bar in… Denver? Providence? The blogging conventions can blur a bit, particularly after the third beer – anyway, this guy was absolutely convinced that a business owner, when faced with a 90% tax on his profits, would voluntarily and happily decrease his profits by reinvestment in the business.  I am sorry to say that I laughed in the man’s face, and told him that this hypothetical business owner would instead decrease his economic activity to the point where he would be in a more advantageous tax bracket.  Oddly, I don’t recall the guy’s reaction to that*.  You think that I would… oh, right, the beer.

Moe Lane

PS: No, I’m sure that it happened. I don’t get that drunk.  Shoot, now that I’m a father I never get drunk at all…

*Although I’m sure that the guy’s convinced that he beat me in that argument.  One reason that I don’t get into many, actually.  I’m a hack and a propagandist, not a debater.

7 thoughts on “Ah, that yearned-for 90% marginal tax rate.”

  1. Thing is, nobody ever paid that. Some folks who couldn’t reduce their activity fast enough paid in the 80% range, but that was the 0.01%…
    This is just more agitprop to crush the middle class – the rich buy or create exceptions, the poor have nothing, who you gonna fleece?

    1. I should mention my idea to “fix” taxes etc. is a 1% income tax floor. No matter how many deductions you have, you cannot reduce taxation below 1%, period.

  2. I seem to recall that no matter how high the tax rate has been, the government pretty much never takes in more than 20 percent of the GDP. The only years it’s topped 20 were in 1945 and 1999, both of which were unique economic times. It makes the wisdom of Joseph to the King of Egypt seem even better.

  3. Damn my memory, but I solidly recall a Hollywood actor from the post-WWII era (not Reagan) discussing how he only made a handful of films a year because anything more and he was working for free due to marginal tax rates.

    1. There were a lot more deductions in the 90% marginal rate days. And as the top rates have crept up from the Reagan-era rates, some of these have unsurprisingly returned.

  4. Let me tell you how it will be
    That’s one for you, nineteen for me
    ‘Cause I’m the Taxman…

Comments are closed.