People seem to be alarmed by the news that a congresswoman has proposed a top marginal income tax rate of 70 percent. That would be alarming, if it applied to an entire income. But “marginal tax rates” are part of our “progressive” tax system, meaning that they apply only to income over and above certain thresholds.
In this case, the proposed 70 percent only would be applied to income over and above 10 million dollars. So if you don’t make 10 million dollars, don’t worry.
“Progressive taxes” impose lower rates on lower income earners compared to those with higher incomes. It is a fairness standard based on the ability to pay. In our country the highest marginal tax rate has varied, with a high of 94 percent in 1944. From 1951 through 1963 the top marginal tax rate was between 91 and 92 percent.
The 70 percent proposal sounds radical because we have come so far from fair taxation since then. The top marginal rate as a result of the 2018 tax “reform” law is down to 37 percent.
These tax reductions that favor the very wealthy are accompanied by the promise that everyone will benefit. Looking at stagnant median wages, crumbling infrastructure and other indicators of underfunded social needs, I don’t believe that promise has been met.