Saturday, June 13, 2009

Historical Tax Rates

A lot has been made of President Obama's tax increases for couples making over $250,000 a year. Both sides of the debate have engaged in hyperbole - the pro-tax side pointing to the 94% tax rate in the early 1960s as evidence that taxes are at an historical low (without mentioning that nobody paid that top rate); and the anti-tax side claiming that slight increases in taxes on the top 1% of incomes create powerful disincentives to work. But what would this hypothetical couple's taxes have been historically? How different are tax rates today than they used to be? I haven't seen this data, so I had to put it together myself:



For most people, aside from the period of "bracket creep" in the 1970s, tax rates have fallen in a very small band since 1954. Taxes are presently at their lowest levels for all groups (aside from the $500k+ earners, who hit their low in 1988-89 and then saw rates go up in the "Read My Lips" era.) One important thing to keep in mind is that because of increasing inequality, earning an inflation-adjusted $500k was much less common in the past than it is today.

This graph shows tax rates as a percentage of their 1998 levels:

1 comment:

  1. Your figures are in error. The taxes for both Clinton and Bush were calculated using the maximum rate for that selected income. For instance the Clinton 1999 tax rate on 30K was 28%, which is what they used to get the 8400 figure. However taxes are not calculated that way. The first 25K of income would have been 2013 tax brackets at the lower 15% bracket first, thus yielding a much lower figure than what you show.I am not arguing that Bush doesn't have lower taxes. He certainly does. Of course he obtained his lower tax brackets by using deficit spending and increasing the national debt. Add back in the interest payments we'll be making and I bet Bush actually cost taxpayers far more than Clinton ever did.

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