Wednesday, November 24, 2010

Are taxes really too high?

Often we see politicians talking about lowering taxes. Often they say that it will spur economic growth or they say we are paying high taxes. They say that as if right now we are paying some historically high tax rate.

But if you look at the history of the American tax rate it is clear that this is not true, if you look at the top tax rate. There have only been a few periods where taxes have been below where they are at right now (35%) on the top income earners. Those times where 1988-92, 1925-31 and 1916 to 1916.

Truth be told taxes have often been much higher. In fact if you look at America after WW II (a period of great economic expansion for this country) the richest Americans paid at least nearly twice what they do now. Normally taxes for people in the top income bracket was in the 70's to 80's percent but reached as high as 92% in 1952.

So while we have politicians pushing to make sure the rich keep tax cuts, there isn't much historic proof that keep taxes as low as they are now on the rich is actually a good thing.

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