However, the USA is a remarkable country in the history of the world. In the 1930s through the 1980s we averaged an 81% top marginal income tax rate. That’s astronomical! Yet that was also a time of enormous growth and innovation. The two, in history at least are correlated. Now correlation does not prove causation, but perhaps it is worthy of further inspection as a battle rages for the difference between a top marginal income tax rate of 35% and 39.6%. On the whole, it’s insignificant, because nothing above 50% will likely deter highly paid employees from selling their employers on paying more and more. In other words, at 80% tax, there is no point in arguing for another million dollars, because you can only keep $200,000, but when that tax rate is only 35%, you could keep $650,000 of that million dollar raise. Piketty argues for a return to 80% top marginal tax rates, with a rate below that of 50-60% for incomes in the top 5% of people, that is incomes above above $200,000.
Nothing in this chapter really struck me as crazy. He advocates only for tax rates that have been tried in the last 100 years. The challenge is those with the most to gain from lower top marginal tax rates argue the hardest for low top marginal tax rates. In short, when it comes to the progressive income tax, it's a great invention, but there are too many exemptions (like the long term capital gains tax) and the trend seems to be reducing tax rates instead of increasing tax rates.
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