We worry about sustaining vital public services, services that grow ever more important during a time of crisis like the present. With revenue declining because of the “Great Recession” all the talk is that we have no choice but to make the tough decisions about which programs to cut and by how much.
Calls for tax increases on the wealthy are routinely dismissed as bad economics. According to the conventional wisdom, we need to keep their income taxes low in order to create the right entrepreneurial environment (to encourage their investment). In fact the argument usually ends up supporting new tax cuts.
Hearing this kind of talk you wouldn’t know that every year between 1936 and 1981 the top marginal tax rate was at least double the current top marginal tax rate of 35%.
We are talking real money here. As the Institute for Policy Studies reports:
In 2006, the 139,000 taxpayers reporting at least $2 million in income paid taxes, after taking advantage of every loophole they could find, at a 23.21 percent rate. In 1955, taxpayers who made over $2 million in 2006 dollars paid taxes—on their total incomes—at over twice that rate, just over 49 percent. U.S. taxpayers who made over $2 million in 2006 averaged $5.9 million in income. If these taxpayers paid taxes at the same rate as their 1955 counterparts, the federal treasury would have collected, in 2006, over an additional $202 billion.