Historical look at top marginal tax rates

Timothy Taylor (h/t @tylercowen) has an interesting post on the revenue raised by different the U.S. tax code from 1958-2009 (total revenue and the distribution). This point in his review of this Tax Policy Center piece caught my eye:

2) Raising tax rates on those with the highest incomes would raise significant funds, but nowhere near enough to solve America’s fiscal woes. Baneman and Nunns offer this rough illustrative estimate: “If taxable income in the top bracket in 2007 had been taxed at an average rate of 49 percent, income tax liabilities (before credits) would have been $78 billion (6.7 percent of total pre-credit liabilities) higher, taking into account likely taxpayer behavioral responses to the rate increase.”

We need a fairly comprehensive tax reform that makes clear about how much revenue we need to raise (which is of course linked to the spending we want), and which not only focuses on marginal tax rates but the tax expenditures that are allowed to remain. We are entering a higher spending period by default given the baby boomers moving into Medicare and Social Security, with a lower-than-average tax code in terms of revenue collected. It seems likely that the effective tax rate will rise for most everyone.

About Don Taylor
Professor of Public Policy at Duke University (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute). I am one of the founding faculty of the Margolis Center for Health Policy, and currently serve as Chair of Duke's University Priorities Committee (UPC). My research focuses on improving care for persons who are dying, and I am co-PI of a CMMI award in Community Based Palliative Care. I teach both undergrads and grad students at Duke. On twitter @donaldhtaylorjr

2 Responses to Historical look at top marginal tax rates

  1. Pingback: The most important tax reform decision « The Reality-Based Community

  2. Pingback: The most important tax reform decision « freeforall

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