Republicans in Missouri are willing to see the State go to hell in the proverbial handbasket rather than tackle meaningful tax reform, particularly since that would almost necessarily involve raising the top rates. They have been huffing and puffing about taxes for so long that the topic has become a textbook example of not being able to see the forest for the trees. At this point even Democrats salivate when Republicans ring the tax bell.
Tonight, however, while I was listening to the NewsHour on PBS, some commentator happened to mention that the top tax rate from 1941 to 1963 was 90%. That’s right, 90%. I was there in the 1950s; true, I was just a child, but I remember that it was not a period of poverty and struggle — that was my mother’s childhood in the 1930s when the economy crashed after a low-tax boom time. The comment inspired me to do a little casual investigating.
What I found is that tax rates stayed high through the 1960s when the top marginal rate was 70%. It wasn’t until the Reagan years that tax rates were lowered significantly. Nevertheless, according to these charts, which compare tax rates to four wealth indicators, GDP growth rate, income growth rate, hourly wage growth rate, and unemployment rates, the economy seems to have done very well indeed from 1941 through the 1960s in spite of high tax rates for the wealthiest. (You can check some of these figures by using the data and calculators on www.measuringwealth.com if you want a more neutral source.)
I also found an article by Linda McQuaiq who describes the same pattern in Canada:
Indeed, Canada’s top marginal tax rate was above 80 per cent from the late 1940s until 1970, and yet our annual economic growth in those years was above 5 per cent. In 1981, we reduced our top marginal rate to 50 per cent, and yet our growth rate has averaged only 2.4 per cent since then, notes Osgoode Hall tax professor Neil Brooks.
One can only agree with her conclusion that “this suggests high taxes on the rich are not the prosperity-killer that the rich claim.”