THE TRUTH ABOUT TAXES: Here's How High Today's Rates Really Are

US Income Tax Top BracketNational Taxpayers UnionHistory of the top income tax bracket, 1913-2008.

As the US struggles with a massive budget deficit, the conversation has obviously turned to taxes.

Specifically, what should be done with them.

Obviously, no one likes paying higher taxes, and everyone likes paying lower taxes. But we live in the real world, not fantasy-land. And in the real world, sometimes people have to do things they would prefer not to do--like pay taxes.

But the disagreement on this issue, as well as the facts surrounding it, is intense.

Democrats, to the extent they care about the budget deficit, want to raise taxes, which they say are too low--especially on rich people.

Republicans, meanwhile, generally say that taxes are far too high and that the budget deficit should be addressed with spending cuts. To get the economy back on track, Republicans argue, you need to give Americans an incentive to work hard--by letting them keep more of what they earn. Republicans also argue that raising taxes would clobber an already fragile economy.

So who's right?

Are taxes too high? Or are they too low?

Do high tax rates on "rich people" create a lazy population in which no one has an incentive to work hard?

And what about the Republican mantra that cutting taxes is always good for the economy, while raising taxes is always bad?

Thanks to the Tax Foundation and other sources, we've analyzed tax rates over the past century, along with government revenue and spending over the same period.

This analysis revealed a lot of surprising conclusions, including the following:

  • Contrary to what Republicans would have you believe, super-high tax rates on rich people do not appear to hurt the economy or make people lazy: During the 1950s and early 1960s, the top bracket income tax rate was over 90%--and the economy, middle-class, and stock market boomed.
  • Super-low tax rates on rich people also appear to be correlated with unsustainable sugar highs in the economy--brief, enjoyable booms followed by protracted busts. They also appear to be correlated with very high inequality. (For example, see the 1920s and now).

Don't take our word for it, though.


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THE TRUTH ABOUT TAXES: Here's How High Today's Rates Really Are

And what about the idea that high taxes are bad for the economy?

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