Let the upper-bracket tax cuts expire

Chart added 9/9/10

During the George W. Bush administration, federal income taxes were reduced by a few percentage points for all income classes.  But it is the tax reductions for upper income brackets, and not the tax reductions that affected the vast majority of the American public, that threw the government into deficit.

During the Eisenhower years, the top income tax rate was 91 percent.  Millionaires and billionaires didn’t pay 91 percent of all their income in taxes, of course, only that above a certain threshold, and only when they couldn’t find a way to shelter it. During the Kennedy years, the top rate was 70 percent. I don’t advocate restoring those rates, but growth in jobs and wages was a lot better during the Eisenhower-Kennedy era than it is now.

An estimated 47 percent of American households will pay no federal income taxes at all for 2009, a record figure. (These households will, of course, pay sales taxes, payroll taxes and other taxes.)  Some people who worry about rich people paying too much also worry about poor and working-class Americans paying too little; they think the way to provide incentives to work harder is to make rich people richer and poor people poorer.

I don’t think any segment of the population should bear the entire burden of taxation, but you would hardly do that by allowing the Bush-era tax cuts to expire, and the tax rate to revert to 39.6 percent from 35 percent, on income in excess of $250,000 a year for couples and $200,000 for individuals. The 39.6 percent rates did not prevent the wealthiest 1 percent of Americans from increasing both the amount of their wealth and their share of the national income.

Chart added 9/9/10

Chart added 9/9/10

Click on this for a report and chart showing how much more revenue the government lost from tax cuts for the rich than from tax cuts for average Americans.

Click on this for a report on the rising incomes and declining tax rates for the richest 400 Americans.

Click on this for the raw data on the Top 400 from the Internal Revenue Service.

Click on this for charts and figures showing the U.S. tax system does not soak the rich.

Click on this for a report on how many families escaped paying federal income taxes this year, and the taxes that these families do pay.

Click on this for commentary on why that’s not something to worry about.

Click on this for an argument as to why the 2001 and 2003 upper bracket tax cuts should be allowed to expire on schedule.

Click on this for a facts and figures on the failure of “supply-side” economics.  [Added 9/20/10]

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