I didn’t ask about Sweden or the UK, and I didn’t ask about “effective” tax rates. I asked about top marginal rates.
Thank you, septimus and CarnalK for addressing that question.
Aaand I didn’t ask about corporate rates.
puddleglum, I know marshwiggles are slippery, but seriously: Did the higher top marginal rates–for individuals–in the US during the bulk of the 20th century cause a decline in entrepreneurship or innovation?
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Are you quoting all that from memory? Impressive but I’d love a cite to look over because the “effective” top tax rate can be a slippery number. From the wiki on the '64 Revenue Act:
Sorry, I really need some back up here. Why do you know that mid and small companies don’t provide significant jobs? Looking at the US Census site, they say medium and small businesses make up a little less than half the employment in the US.
Statistics of U.S. Businesses Employment and Payroll Summary: 2012 (pdf)
I don’t believe this is true. From this pdf FAQ:
That’s such a ridiculously simplistic assertion about a complex situation that the description “flat-out wrong” comes pretty close to describing it. There is obviously some point at which some level of taxation might become a disincentive, but to suggest that this is a blanket rule across the board is absurd. The US had very high marginal tax rates for a long time and business and the economy trucked along just fine – it didn’t discourage business investment, what it did was discourage obscenely high executive salaries which began shooting up when marginal rates went down, and thus began the large and growing income gap between the 1% and everyone else. And executive productivity hasn’t improved one iota. In fact I’ve seen studies showing an inverse correlation between high levels of executive compensation and actual accomplishment.
But back to the main point. You may feel that fewer people will start businesses if taxes are too high, but I assure you that none at all will start businesses without the vast physical and economic infrastructure that government either provides directly or beneficially regulates, assuring things like transportation, money supply, financial services, honesty in business practices, and reasonably free markets. So taxes are necessary, like it or not. Your mantra would seem to imply that the ideal business environment is achieved when taxes are zero and government disappears altogether in a puff of smoke. This is absurd.
Moreover, I don’t think anyone thinking of starting a business is going to examine the fine details of top tax rates to see if he’s likely to become filthy rich or just very rich. I think he’s far more likely to be interested in the probability of success. And that, too, is significantly influenced by government policy and the kind of business and economic climate that government creates.
This being Great Debates, I am sure that you are ready to back up this opinion with some facts on how you arrived at this conclusion. Right?
While he’s at it, maybe also have him explain how the US national debt has soared to such an extent that tax-cut and spending policies are already driving the government to the brink of bankruptcy, while Bernie Sanders style policies in Canada have been creating surpluses in many years and quietly paying down the national debt …
Since 1990, U.S. federal debt has more than quadrupled while Canada’s debt rose by about 55%. In the 10 years ended in 2010, Canada’s debt showed a moderate decline and U.S. debt doubled. Why the differences? Statistics show that Canada has made an effort to reduce debt and paid off over $90 billion from 1997 through 2008.
Huh? wolfpup thinks the last 10 years of Harper government is similar to how a Sanders government would be. There are still surprises in this world I guess.
Do those surprises include your surprising lack of reading comprehension, or your surprising interest in revisionist history?
Note the key part of the statistic I quoted: “In the 10 years ended in 2010”. Harper wasn’t even elected until 2006 and though he arrogantly claimed credit for the Liberal government surplus he inherited, he had absolutely nothing to do with it. He never even had a majority government until 2011. It was the Liberal government that was responsible for the financial prudence that led to those surpluses and debt paydown, and largely Harper that destroyed it.
This article in its entirety is an interesting read, but this is the money quote:
On Feb. 23, 2005, the minority Liberal government of the day delivered its ninth consecutive balanced budget. Then-finance minister Ralph Goodale forecast a minimal surplus that was widely understood to be — and criticized for — understating the true size of the anticipated surplus, due to a $3-billion contingency reserve and the government’s “prudent” assumptions on economic growth and revenue.
The opposition Conservatives, led by Stephen Harper, initially expressed support for the Liberal spending blueprint but ultimately voted against it in May 2005 … by 2008-09, the federal government was back in deficit, recording a $10 billion shortfall.
http://www.huffingtonpost.ca/2015/04/24/baloney-meter-did-the-co_n_7134660.html
I would additionally point out that, nutty as his personal ideology may be, Harper was forced by political pragmatism to recognize Canadian values on such issues as universal single-payer health care, progressive taxation, abortion rights, and many of the other left-right divisive issues in the US, so in many respects even Harper was, reluctantly, closer to Bernie Sanders than any other mainstream US politician. Today Justin Trudeau makes Bernie Sanders look like a reactionary conservative.
Ooooh, so only some of Harper’s reign. Yeah, revisionist history is fun.
These charts from the Tax Foundation show otherwise:
http://taxfoundation.org/sites/taxfoundation.org/files/docs/fed_individual_rate_history_nominal.pdf
You will find that the top rate in 1952 was 92 percent.
You will find that the top rate in 1960 had declined all way down to 91 percent.
In both years, the top rate applied, for a married couple, for adjusted income above $400,000 a year.
As for your use of the word “effective,” these were the rates in effect for incomes above that amount. It is true that the super-high-earners, who might get into those brackets, had accountants who often used various techniques to reduce their taxable income. However, thousands of Americans did declare enough income to hit that 91 or 92 percent bracket:
http://ir.uiowa.edu/cgi/viewcontent.cgi?article=1045&context=law_pubs
The above link may be the ultimate source of the 49 percent/31 percent figures you cite. Googling finds them cited by at least one conservative commentator. But the numbers don’t mean what you think they mean.
Read the article. And do try hard to understand the events and dates.
As Department of Finance official Peter DeVries duly noted, Harper’s first government didn’t even sit in Parliament until the 2007 fiscal year. Any policies they may have enacted wouldn’t have had any effects until at least the following year if not later, namely by just around the time that the federal budget nose-dived and was $10 billion in the hole after nearly a decade of Liberal government surpluses.
Sorry, but all the caterwauling here about how liberals bankrupt governments and conservatives are its saviors is just pure abject nonsense contradicted by the facts. The most amusing of those in recent US history being how GWB inherited a strong robust economy from Clinton with declining deficits, and eight years later left Obama with a smoking, steaming pile of economic wreckage and a disastrous meltdown in the housing market that was causing many hardworking families to lose all the equity in their homes and sometimes lose the homes themselves.
In what way do you feel that the post you were replying to incorrect? Do you dispute that “Sanders said he would not propose a 90% tax rate”? Do you dispute that that statement and “Sanders said that he did not think a 90% tax rate was obviously too high” are not contradictory? Do you dispute that “Sanders said that he did not think a 90% tax rate was obviously too high”, and believe he said something stronger?
Before I read the article, give me the highlights as to how Sander’s budget plan matches up with the Chretien/Martin/Harper budgets.
It’s true that the record of liberals is better than the record of conservatives, but that does not mean that the record of liberalism is better than the record of conservatism. It just means that liberals have an incentive to make sure the process doesn’t go belly up, so when it is necessary, they are better conservatives than conservatives. Bill Clinton did not balance the budget through any process which anyone would call liberal. It happened by cutting spending, the federal workforce, economic growth due in part to free trade and deregulation, and welfare reform savings that took advantage of that economic growth.
Likewise, Canada has been absolutely ruthless in controlling spending since the 90s.
So you can see why the misconception exists. The fact that in our own country, blue cities and states tend to perpetually be in financial trouble reinforces the belief that liberal policies can lead to bankruptcy. The problem with Sanders, as opposed to Clinton, is that it’s not clear that Sanders would be as pragmatic as a Clinton. When people are as bent on social justice as a guy like Sanders is, he may just decide to spend, spend, spend, and when we run out of money just stiff our creditors. It’s justice, after all.
Gee, the article isn’t all that long, so I don’t know why you need a complex justification before you deign to read it. It shows that Harper didn’t do a damn thing to support the economic situation my quote was describing – the previous Liberal governments did.
And my reference to Sanders was in terms of the significant ideological divide between Canada and the US which is consistent across many different governments and not associated with the specific policies of any one of them. You have only to look at the Sanders policy platform to see the similarities to traditional Canadian values on issues like tax policy, income and wealth inequality, quality of life, and liberal immigration policy (though some of the latter is necessarily US-specific).
There may be some interesting food for thought there, especially with regard to US-specific outcomes, so I don’t want to be instantly dismissive of it, but I have to say that at first glance it does seem like specious semantic wordplay, to wit: “sure, liberal policies have often been successful, but if you look closely you’ll find that those liberals were actually conservatives!” 
I mean, if you start out by defining “liberal policies” as “reckless spending polices that are doomed to failure”, then it’s fairly likely that you can show that said reckless spending policies doomed to failure do in fact end up in failure. Kind of a foregone conclusion, right? As implied in my other response above, I don’t see anything in Sanders’ policies that looks anything like that.
Liberalism actually says that taxation should be progressive, not that it must be excessive, and it says that spending and social policy should be such as to support the most needy with some level of dignity and maintain the kind of income distribution that is consistent with a stable and peaceful society, not that spending should be reckless or taxation should be punitive.
Liberalism says that the entrepreneurial pursuit of wealth should be encouraged as a win-win proposition, but that it has to be balanced with the health and quality of life of those who have been recruited to support that pursuit, who are not pack animals or dray horses but actual human beings with actual human rights (and I have argued that aforementioned animals actually deserve more rights than some human employees get in some places). And so on, through all the multi-faceted layers of social complexity.
My point was simply that you can’t point to the better national records of liberals vs. conservatives(outside the US as well) as evidence that liberalism is always the way to go. Clintonism and Chretienism working is not a sign that Sanders’ ideas will work even better, or even nearly as well. The medium term outlook for the budget is grim as the Baby Boomers retire, yet Sanders is proposing raising taxes to pay for new things without any plan to deal with the fiscal responsibilities we already have. Good liberal governance has always relied on the conservative idea that you have to pay for what you want. I guess it’s fair to call that liberalism now since conservatives seem to have abandoned that idea, but either way it means you can’t increase spending by hundreds of billions a year and expect a good result.
I’m just having a hard time accepting the dogma on entrepreneurs.
Supposedly a person is out there working a $50,000 a year job. And he has the knowledge and resources to start up his own business. And his business, if successful, would make him a million dollars a year.
But then he checks the tax rate. Now apparently if the tax rate is low enough - let’s say 25% - he decides to go ahead. He starts up his business, it’s a success, and he’s making $750,000 a year after taxes. But if the tax rate is too high - let’s say 75% - then he says “Well, why would I want to start my own business if I’m only going to have $250,000 a year after taxes? If that’s the case, I’d rather keep working in my $50,000 a year job.”
I’m having a hard time believing that anyone ever in history actually made this decision. Yes, I can certainly see where a person who is rich would like to pay less taxes. But I can’t imagine anyone refusing to be rich because of taxes. It seems to me that people would just go ahead and get rich anyway.
That’s comparing like to like though. Where people make tax decisions is when engaging in new economic activity. For example, is the spouse working worth it when her effective wage is 25% less than it otherwise would be because every dollar she makes adds to your taxable income? Is it worth it to invest if when you lose, you lose, but when you gain, the government taxes 25% of that gain away? That’s a “house always wins” situation, especially when you add in inflation.
Of course, no one turns down a raise because of the taxes, or declines to go into business for themselves because of taxes(unless business taxes are higher than ordinary income). But you’d be crazy not to consider how much net you’d get for a new activity vs. the effort and risk of engaging in that new activity.
Reality, facts, and discussion of civilized democracies, all in one post? Is that allowed?