The current tax code is a mess, and that fact is used by every politician to peddle his/her personal agenda, whether that involves raising or lowering taxes. In 1913 the tax code was contained in a single 400 page book, and today it spans volumes with over 70,000 pages. There are 60,000 full-time lobbyists in Washington focused on pushing tax reform of one kind or another. It’s an industry in itself.
I think who we tax, how much, and for what purpose fundamentally reflects our view of human nature and justice. On this subject, I’ve always been very torn (at least at the philosophical level). On the one hand taxation at its worst is an oppressive tool of government bureaucracy backed by force. On the other hand, at it is best, it is a funding source for implementing the ideas that emerge from our democratic process.
I find too many people are unaware of: the past and the present of the U.S. income tax. Le me put up some simple numbers…
That’s the income tax for the top bracket from 1913 to 2009. Throughout its history, it’s gone under 10% and over 90%. These days, I hear conservatives will argue that 10% marked the prosperous times, while liberals will argue that 90% was the real source of growth. It’s a chaos of facts interpreted in any number of ways to prove arbitrary subjective points. Though there is science amid the chaos, sometimes it’s hard to identify.
The other set of numbers is the current marginal income tax rate per bracket:
- 35% for over $370,000
- 33% for $171,000 to $370,000
- 28% for $82,000 to $171,000
- 25% for $34,000 to $82,000
- 15% for $8,000 to $34,000
- 10% for under $8000
I do want to emphasize a surprisingly misunderstood fact. If I make $400K, only $30K of that is taxed at 35%. The rest is broken down into the above brackets and taxed at 33%, 28%, 25%, 15%, and 10% respectively.