According to a new Pew Research Center poll, roughly two-thirds (63%) of Americans support the idea of the government increasing taxes on large corporations and higher-income households.
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The disproportionate influence of billionaires and the growing chasm between them and the middle class are among many reasons why Americans have shifted their views on taxation. Furthermore, the obstinacy of both parties in Congress — their stubborn refusal to address this decades-long issue — has led to calls for broader structural reforms and a more aggressive tax policy on the wealthy, with some proposing a top marginal rate as high as 70%.
While younger readers may find it difficult to picture tax rates being this high, older Americans will remember living through decades of higher taxes years ago. Using data from the Tax Policy Center, we can see that from 1964 to 1980, the top marginal income tax rate stood at 70%, with some years even higher.
And before 1964, the highest marginal tax bracket stood at a staggering 91%. Interestingly, historians refer to this period with a variety of labels: postwar compromise, Fordism, and the golden age of capitalism, thanks to the uptick in living standards and favorable employment numbers made possible by comprehensive reforms of the New Deal.
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Before delving further into the article, it’s essential to note that a 70% tax rate does not mean that 70% of your income is taxed. The top marginal rate would only apply after one’s income exceeds a certain threshold.
The illustration below, taken from the Internal Revenue Service (IRS) website, illustrates how marginal tax rates apply to a single filer who earned $58,000 last year. Let’s call this person John. John’s first $11,600 of income was taxed at 10% — the amount from $11,600 to $47,150 was taxed at 12% — and the final amount, from $47,151 to $58,000, was taxed at 22%.
As exemplified in this case study, we can clearly see that John, whose income falls within the first three of seven brackets, would not be affected by a 70% top marginal tax rate. Also worth noting, the median personal income in the United States (as of 2023) was $42,220, according to Federal Reserve Economic Data. In other words, most Americans will not be taxed in the top bracket.
