Myth Busting: Lower Top Margin Taxes Don’t Prevent Recessions

March 16, 2009

John Cole recently posted a very informative graph of the top tax rates since 1920. I added to that red lines to indicate depressions and recessions to make another, related point: most of America’s recessions occurred after the top margin taxes were lowered, with the worst recessions taking place during or after the top tax rates were at their lowest. The recessions of 1953, 1957, and 1960 were one-year recessions while the others lasted 2 or more years. The Great Depression, the 73-75 recession, and our current recession are arguably our worst of the last 100 years and came when the top margin taxes were at their lowest rates.

While it is foolish to argue cause and effect between lower tax rates and economic hardships, the counter argument that lower taxes on the wealthiest are better for everyone is equally foolish, proven wrong by this chart. Lowering tax rates at the top margins are far more likely to hurt the country than help it.

Top margin tax rates & recessions

Top margin tax rates & recessions

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