Have you ever heard the claim:

“Well, taxes on the rich were over 60-90% back in the mid-2oth century and the economy thrived!”

Well, it’s utter nonsense. Thanks to tax deductions, credits, etc the effective top marginal tax rate, which is the tax rate people actually paid after they earned a certain amount of money, has historically never been above 30% (see below).


[Graph is from the Congressional Research Service]

As you can see, the top marginal effective tax rate is entirely independent of the top marginal rate. 

That doesn’t even mean that rich people pay 30% of their income to the government, only that 30% of their income goes to the government after they earned a certain amount of money. Currently, the first $400,000 a person earns is subject to lower tax rates. The top marginal tax rate only applies to a person’s income after they earn $400,000. In…