The biggest time of economic expansion in America was during the late 40's to late 70's. The top marginal income tax rate within those years was between 70% and 90%. I know a lot of you will say "LOOPHOLES! DEDUCTIONS! THEY DIDN'T PAY THOSE TAXES!" Well, that's true, but they certainly still paid much higher taxes than they do today and we had the BEST expansion in American history.
Why is raising taxes on the rich good for the economy?
When you have a high marginal income tax rate, what you are doing is disincentivizing business owners from taking money out of their business and putting it into their personal accounts, because they know if they do that they're going to get taxed at a higher rate, so it incentivizes them to leave their money in their businesses and to expand. When you do this, you have a great economy.
Now during the 80's, Reagan was known for what would be called "Reaganomics", which is basically just cutting taxes for the rich and hoping that it trickles down to everybody else, that's what they call "trickle down" economics - we implemented that in the 80's and we had one of the worst boom/bust economies ever, as a direct result of cutting taxes on the rich from 70% down to 28%.
Now I don't think it should be back up to 70%, but it should be compromised in the middle at around 40%.
When Reagan deregulated the economy, we had a boom for a few years, but then the inevitable bust. This happens every single time you cut taxes on the rich, it happened under George W. Bush and we got the recent recession.
If I'm wrong, tell me how and why.
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