ECONOMY - The History of Tax Rates

"What Do Tax Rates' Ups and Downs Mean for Economic Growth?" PBS Newshour 12/12/2011

Excerpt

PAUL SOLMAN (Newshour): The super committee doomed in part by a deadlock over taxing the rich. Same for the bill to extend the payroll tax and unemployment benefits, held up by the issue of taxing millionaires.

And so the question: Do higher taxes on the rich retard economic growth, or don't they? We thought we'd look to history for an answer, visiting landmarks of New York with nonpartisan tax professor Alex Raskolnikov -- first stop, a memorial to World War I, which the U.S. entered in 1917, soon after the federal income tax began, with rates from 1 percent on a net income of up to $20,000 -- today's half-a-million or so -- en route to 7 percent on all earnings above $500,000, today's $11 million or more, higher rates on the extra or marginal income -- thus the term marginal tax rates.

Ending excerpt

PAUL SOLMAN: At the end of the day, then, high inequality and a sluggish economy.

Unfortunately, if history is any guide, there's no conclusive evidence that economic growth is stimulated by lowering marginal tax rates on the rich, or, for that matter, raising them.