Death of a Talking Point
One of the most ignorant and dishonest of the Democratic talking points that show up during budget debates like the one we currently are having is: “We could fix our budget problems if only we would return to the tax policies we had in the 1950s and 1960s, a time of widely shared prosperity with top tax rates above 90 percent for the rich.”
That is a fun talking point. My progressive friends love it. But it is a lie.
In the 1950s, there were very high statutory tax rates, meaning that a taxpayer could, in theory, pay a top marginal rate of 92 percent. But this applied to very few taxpayers and to a very small share of their income. That is why when you look at the data from a more meaningful economic perspective, U.S. taxes were a lot lower in the 1950s than they are today: Federal tax revenue from 1950-60 averaged only 16.8 percent of GDP, as opposed to the 19.6 percent of GDP collected in federal taxes in 2022. (GDP terms are useful because they capture the fact that our population is both larger and richer.)
Which is to say, if we had 1950s taxes (16.8 percent of GDP) and 2022 spending (25.1 percent of GDP), then our deficit would be a lot worse—not 5.5 percent of GDP but 8.3 percent of GDP; conversely, if we had 1950s spending (17.2 percent of GDP) and 2022 taxes (19.6 percent of GDP), we would be running a large surplus.