91% Tax Rate
During the past week New York Times Op-Ed columnist Paul Krugman wrote fondly of bygone days of Twinkies and a 91% tax rate. Yes you’ve read that correctly, a 91% tax rate.
Krugman has credentials.
Krugman is, an American economist, Professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times. In 2008, Krugman won the Nobel Memorial Prize in Economic Sciences for his contributions to New Trade Theory and New Economic Geography. According to the prize Committee, the prize was given for Krugman’s work explaining the patterns of international trade and the geographic concentration of wealth, by examining the effects of economies of scale and of consumer preferences for diverse goods and services.
Given his list of credentials and accomplishments, his current writing harkening back to the 1950’s and a growing and robust postwar economy, does make one pause and wonder. Krugman recalls the golden age, “of the typical executive, who lived in a smallish suburban house, relied on part-time help and skippered his own relatively small boat.” While there are those who might desire for simpler times we’re told by none other than President Obama that we must move “Forward.”
Krugman’s argument for a return to the 1950’s and a 91% tax rate is completely out of touch with what’s going on in 2012. Let’s look back at the 1950’s.
Then and Now
In the 1950’s federal spending was 17% of our Gross Domestic Product (GDP).
Now federal spending is 23% of GDP.
In the 1950’s federal deficit was .8% of GDP.
Now the federal deficit is 7.8% of GDP.
In the 1950’s Social Security spending was 6.5% of the federal budget.
Now Social Security Spending is 20% of the federal budget.
Back in the late 1940’s and into the 1950’s those paying into Social Security outnumbered those drawing from the program by a factor of 40 to 1. In today’s economy that number has dropped to a 3 to 1 ratio and is declining.
Krugman hauls out that well worn statist talking point of the wealthy paying “their fair share.” What he fails to define is just what is considered anyone’s fair share of their income. Krugman cites the 1950’s marginal tax rate of 91%, and is that fair? Why not 90% or 92%?
The bottom line appears to be that Krugman, is in lockstep with President Obama and the rest of those whose automatic answer to not enough money in the federal coffers is to simply raise taxes and nothing more.