Wednesday, November 3, 2010

About Those Postwar Tax Rates

Will Bunch re-tweets:

"Top marginal tax rate for the entire 1950s was 91%. Yet the U.S. economy expanded 79%. Overall tax burden today is lowest in 6 decades"

This tidbit is actually pretty commonly repeated among liberals -- I think I've even used it myself in a Scripps Howard column -- and yet it feels slightly dishonest not to acknowledge that the world economy was vastly different during the 1950s than it is today. Britain and Western Europe were slowly recovering from the devastation of World War II; same for Japan. The Soviet Union, Eastern Europe and China had more or less withdrawn from global trade. The United States was so vigorous during this time not because of high marginal tax rates, but because it was basically the last man standing. That's no longer the case: Other countries are more competitive with our own economy, so we need to be more competitive too.

This isn't an argument against returning to Clinton-era marginal tax rates. I think that could safely be done without harming the economy to any great extent. But dropping the Ike-bomb on the tax discussion often omits the ways the world has changed, and liberals do themselves no great service when they make that omission.

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