Do high marginal taxes actually bring in more revenue?

Veronique de Rugy (via Insty) has a graph that says more than a thousand words. Below are plotted two variables as a function of time: the highest marginal tax rate in the USA, and the percentage of aggregate taxpayer income that is raised as actual tax revenue. Surprise, surprise… even when the top marginal tax bracket exceeded 90%, the Federal gov’t did not manage to capture more than about 20% of aggregate taxpayer income as revenue.

US marginal tax, and tax revenue as a percentage of aggregate income, over the years

So ideas about solving the deficit by “soaking the rich” may make wealth distributionists feel good, but will not materially solve anything. They aremere exercises in intellectual self-gratification — which some would argue is the true essence of left-liberalism.

The interesting part for me isn’t that “soaking the rich” just won’t work (this doesn’t surprise me) but how the aggregate tax revenue exhibits, all things considered, such low sensitivity to wild variations in the highest marginal bracket.

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