Starboard Broadside

In my continuing informal series on the history of Federal income tax rates, I'd like to present this graph of marginal tax rates on the highest bracket of taxpayers. It's a MoveOn.org's beautified version of a graph by John Cole:

Here's Cole's comment on his graph:

The 2010 proposed rate of 39.60% = socialism.
The 2002-2008 rates of 35.00% = capitalist nirvana.
The 39.6% rate of the 1990’s = socialism.
Everything else = down the memory hole.
That Obama fellow sure is soaking the rich, isn’t he?

Yeah. These are the numbers I alluded to in my first post in the series. It's been a lot higher before, without much difficulty. Look at the Eisenhower boom years of the 1950s; 91% is bigger than 40% and the economy didn't die and rich people didn't go extinct.

Plus, anti-tax nuts like to pretend that a 39.6% marginal tax rate (i.e. pre-Bush cuts) on 288,350 dollars means $114,187 in taxes, when they know that it's a marginal rate, which means that the 39% only applies to every dollar earned at or above the 288,350 line. 39 cents per dollar above the line.

That's where the word marginal comes in. There are lower rates for dollars earned up to certain tiers below that. For example, in 2000, for a wealthy filer, income earned up to $43,850 would only mean $6,578 would be owed at a 15% marginal rate. Additional money earned above that line would then be taxed at the next rate (28%) until the the income hit the next tier. And so on up to the 39% rate mentioned above for very high salaries. It's pretty basic, once you break it down, but it's easy to misrepresent to the public, especially since many people wouldn't fall into more than one or two brackets. Thus, the anti-tax people can get away with their outlandish claims. Nobody ever handed over 91% of their total income in one filing under Eisenhower, but few people have researched tax rate history, so they wouldn't know that marginal rates have been much higher in the past.

(my source on tax rates)

But I guess that's why I'm here to look this stuff up. Any questions?