Mad High Tax Rates

Posted August 20th, 2009 at 3.14pm in Enterprise and Free Markets.

On this week’s season premiere of the popular AMC show “Mad Men” viewers were reminded about the punitive high tax rates in the 1960s:

This episode of Mad Men takes place in 1963, when the top income tax rate was 91 percent on incomes over $200,000 ($400,000 for married couples). That translates to about $1.4 million in 2009 dollars. The top rate today is 35 percent on incomes over $372,950. In 1963, by comparison, incomes over $10,000 (about $70,000 in 2009 dollars) paid 38 percent.

As the scene from Mad Men makes clear, high tax rates in the 1960s discouraged working harder to get ahead because a large portion of the worker’s additional income went to paying taxes.

Discouraging work lowers economic growth. When this happens we all suffer because lower economic growth means fewer jobs and lower wages across the economy.

Tax rates have fallen significantly from the 1960s. The top rate today is 56 percentage points lower than it was in 1963, so the incentive to work hard and get ahead is a lot bigger now.

But if President Obama’s plan to raise the top two marginal income tax rates to Clinton-era levels and the House’s plan to slap a 5.6 percent surtax on top of that to partially fund a nationalization of the health care system become law, the top average tax rate in the U.S. will climb to 52 percent- higher than in France, Italy, Germany and Spain.

Many workers faced with a marginal tax rate that takes over half of their additional income will decide the extra effort just is not worth it- just like workers in the 1960s did. This will impede economic growth at the worst possible time as the economy suffers through its most severe contraction since World War II.

Mad Men has brought retro-1960s clothing and decor back into style. Let’s not bring back the economically stifling tax policy with it.

Author: Curtis Dubay
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August 20, 2009 “Mad High Tax Rates” « Patriot Burr writes:

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August 21, 2009 Dale, Cincinnati writes:

The left continues to ignore simple facts of human nature. If you pay someone not to work, they will get very efficient at not working. If you take “surplus” income from workers, they will stop producing “surplus” income. In both cases government incentivizes non-productive behavior.

August 21, 2009 Linda Carlsbad, CA writes:

Wake up, this government we have right now is doing everything backwards. To much debt, taking over private corporations, (that they have no clue how to run),taking private companies from American Citizens,giving private companies billions of dollars, (to buy more companies),extending unemployment, (so people don’t want to work anymore), stopping all credit for small business, (so we have to lay off our workers). It goes on & on, this administration is not planing on helping any company grow, except government.How will we pay for the big government, tax the rich, (who employ the people), another bright idea from the uneducated business people in Washington! Common Sense is not found in Washington.

August 21, 2009 Bobbie Jay writes:

Let’s also not forget every single government employee hired to work needless jobs. Community organizer (what does that say about the people in the community?) What’s the purpose? obama’s indoctrination? and of intimidation such as Czars etc. Many more not known any way but needless. All for the depletion of the incomes of others.

August 21, 2009 Lynn B. DeSpain writes:

I remember very clearly, the year of 1970 and my combined Federal and State Tax was 46.5%. And I was a young man then, working in a Mill, with no deductions, worked overtime to have the American dream at $3.75 an hour, and still ended up owing both the State and the Feds several thousand dollars!
Now it seems as if it all has returned ten fold! The Feds pay $4,500 for cars, that used to be bought as first cars at half the price, with our own tax dollars to stimulate the economy, and better than half the sales went to Japan!
American car dealers have only been paid back 2% of the three Billion dollars forked out by them for this ‘Stimulus.
American car dealers who sold Chryslers had their land and buildings stolen from them by the Federal Government! With no money paid to them for their loss! It all was just taken!
Now the Feds are trying to cram National Health Care down our throats, because a small percentage of Americans, not counting Illegas because they do not count, cannot or will not pay for insurance, and this is not new! This has always been. How long are we all going to be so stupid as to let this continue?
Hozro

August 24, 2009 Jerry from Chicago writes:

Heritage — Save your breath. You are preaching to the choir here, and the other side doesn’t care what you say.

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