Editore"s Note
Tilting at Windmills

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September 15, 2010

TOP RATES.... Chris Hayes raised a good point this morning that bears repeating: "I would very much like to see the U.S. return to the average top marginal tax rates of the Reagan administration." He added, "Do Republicans believe the top marginal rates under Reagan were 'job killing'?"

This is relevant, of course, in light of the debate over tax rates in Washington. President Obama wants to keep lower rates for the middle class; Republicans are fighting to protect lower rates for the wealthiest Americans. Under Obama's vision, the top marginal tax rate would return to 39.6% -- where it was under Clinton, and where it would return based on the expiration date adopted by George W. Bush and congressional Republicans.

top_rates.jpg

At this point, the GOP considers a 39.6% top rate, applied only to the top 2% of wage earners, as somehow confiscatory and dangerous. So, to Chris' point, let's add a visual element to the discussion.

John Cole posted this graph early last year, and it's still helpful. See that column on the far-right edge? That's where Obama proposes the marginal top-rate should be. Indeed, that's exactly where the rate would be, effective January 1, 2011, based on the tax policy adopted Republicans several years ago.

(If you're having trouble seeing the chart, MoveOn republished it in an easier-to-read version.)

A 39.6% top rate isn't outrageous. It's not socialism. It's lower than the top rate for most of Reagan's presidency, lower than Nixon's top rate, lower than Eisenhower's top rate, and lower than FDR's top rate when he pulled us out of the Great Depression.

There's really no reason for Republicans to hyperventilate here.

Steve Benen 2:45 PM Permalink | Trackbacks | Comments (17)

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Comments

There's really no reason for Republicans to hyperventilate here.

They need a reason? Since when?

Posted by: Quaker in a Basement on September 15, 2010 at 2:58 PM | PERMALINK

But Republicans LIKE to hyperventilate, even when they are making absolutely no sense whatsoever.
If I see Mitch McConnell on TV one more time babbling about how this is no time to raise taxes while refusing to answer how he would propose paying for $700B - $4T in tax cuts, I might spew.
But then, his constituency is either staggeringly stupid or completely dishonest so go figure.

Posted by: RosiesDad on September 15, 2010 at 3:00 PM | PERMALINK

And this is what is wrong with Democrats. They want to revert to Reagan tax rates. They need to get back to Eisenhower tax rates.

It's time to give the Repubs and the Tea Party the Good Ol' Days they long for.

Posted by: martin on September 15, 2010 at 3:00 PM | PERMALINK

And remember actual facts, even the fact of Reagan, have a liberal bias. These evil goons want to live in a land of make believe ..... facts not withstanding ...

Posted by: stormskies on September 15, 2010 at 3:01 PM | PERMALINK

What you call hyperventilating, Jack London called the call of the wild, and scientists are on the track of human/neanderthal mating. Maybe that's it. Hmm.

Do they howl or do they grunt?

Posted by: Bob M on September 15, 2010 at 3:09 PM | PERMALINK

This discussion has had me a bit confused, perhaps someone can enlighten me. The Republican argument is that an increase in taxes for $250K+ income would adversely effect small business, and stifle growth and job creation, right?

Now, I am not a tax attorney, but I have run several small businesses. My recollection -- and this is where I may simply be confused -- is that most of the income which I reinvested in the business was deductible and thus did not get applied to the marginal tax rate increase. Thus, the increase to small businesses, that Republicans are yelling about, really only has a substantial effect on those business owners who are pulling more money out of their companies and not expanding or investing in them to begin with.

Is my analysis way off?

Posted by: sjk on September 15, 2010 at 3:15 PM | PERMALINK

This is a great point. Democrats should have been talking for years about the need for the prosperous and fortunate to pay "Ronald Reagan tax rates".

Posted by: Ken D. on September 15, 2010 at 3:17 PM | PERMALINK

"Is my analysis way off?"

No -- only 3% of small business owners would end up being affected.

That doesn't stop the crazies (or even ABC news, which I saw do this exact thing), for then they ask, "Do you know how many small businesses we are talking about?" and keep on yammering as if they are making points. Their stupidity is only matched by their craziness. The crazy argument is that when Obama is through with the billionaires, then he's going to come after you!

Posted by: Bob M on September 15, 2010 at 3:38 PM | PERMALINK

I think the GOP is hyperventilating because they made a few 'promises' back when they first set the expiration date. I believe they convinced their major donors they could easily extend the cuts as long as they wished. They are quite possibly about to lose some major backing.

Posted by: wishIwuz2 on September 15, 2010 at 3:45 PM | PERMALINK

In today's GOP, Ronny Raygun, the very god of the conservative movement, would be purged as a RINO.

-Z

Posted by: Zorro on September 15, 2010 at 3:54 PM | PERMALINK

Remember, people, the Bush rates look artificially *high* in this graph because it doesn't account for the 15 percent capital gains/dividend tax, which, presumably, is the biggest portion of the tax bill for the ultrarich. Obama is proposing raising that to 20 percent, rather than the automatic 40 percent. Still unbelievably low from from a historical perspective.

Posted by: Dave Munger on September 15, 2010 at 3:54 PM | PERMALINK

sjk, most of these politicians and pundits don't even know the difference between gross income, and taxable income, let alone set-asides, depreciation, tax credits, re-investment credits, yada yada yada.

Posted by: DAY on September 15, 2010 at 3:58 PM | PERMALINK

More to the point, DAY, I'd wager that a large majority of Americans don't know what a marginal rate even means. For the sake of clarity, a marginal rate is applied to income over a specific level: say, income above $50,000 is taxed a higher rate than is income below $50,000. It does *not* meant that every cent of income is taxed at the higher level; only income over that level.

Unfortunately, I'd be willing to bet that a large majority of Americans believe that if your income goes above the marginal level, *all* your income is taxed at that, leading to such absurdities as people planning to earn just less than the trigger point.

-Z

Posted by: Zorro on September 15, 2010 at 4:10 PM | PERMALINK

lower than FDR's top rate when he pulled us out of the Great Depression.

Hmm. Lets look at that again.

lower than FDR's top rate when he pulled us out of the Great Depression.

Given the desperate economic times, why the urge to experiment? Why not use a brew that worked rather than the weak tea of the Reagan era. Reagan's job creation record lagged Clinton's, Truman's, Johnson's, and Carter's. This recession calls for sterner stuff than Reaganonomics.

Posted by: rk on September 15, 2010 at 4:10 PM | PERMALINK

Why not use a brew that worked rather than the weak tea of the Reagan era. Reagan's job creation record lagged Clinton's, Truman's, Johnson's, and Carter's?

Ben Nelson, that's why.

Posted by: Quaker in a Basement on September 15, 2010 at 4:17 PM | PERMALINK

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Posted by: gaga94 on September 16, 2010 at 9:07 AM | PERMALINK

I remember Jon Stewart talking about this on the Daily Show. Responding to a conservative complaining that Obama's proposed tax rate increases were socialism. Stewart replied that Obama was talking about raising the top rate on income over $250K from about 36% to about 40% and concluded: "At what point between 36 and 40 percent does the tax rate become socialism?"

Also, to washingtonmonthly.com: kick gaga94 off comments, it's just spam.

Posted by: amorphous on September 16, 2010 at 10:42 AM | PERMALINK
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