A version of this column appeared originally in USA TODAY.
Americans have always reveled in nostalgia about the music, fashion or favorite foods of bygone eras, but a sudden yearning for the high tax rates of yesteryear represents a startling new development. While some opinion leaders pine openly for the tax system that once claimed a big majority of income from top earners, their cozy, communitarian vision offers a deeply distorted view of those good old days.
In his defiant "Twinkie Manifesto," professor Paul Krugman, Nobel Prize winner in economics, affectionately cites "the '50s — the Twinkie Era" for "lessons that remain relevant in the 21st century." He particularly applauds the fact that "incomes in the top brackets faced a marginal tax rate of 91%," and later 70% in the 1960s. He associates that policy with "spectacular, widely shared economic growth: Nothing before or since has matched the doubling of median family income between 1947 and 1973."
A group called New Hampshire Labor News, self-described “union members and activists,” similarly praised the golden year of 1952 on the Daily Kos, featuring the headline “Tax Policy: Time to Go Back to the Future?” At the Huffington Post, Dave Johnson has been pushing old-time tax rates for years, including an earnest offering entitled "14 Ways a 90% Top Tax Rate Fix Our Economy." Meanwhile, Krugman’s fellow columnist at the New York Times, Nicholas Kristof, recently caught the fever to punish the rich with grandpa’s tax rates since “half-a-century of tax cuts focused on the wealthiest Americans leave us with third-rate public services.” As Congress careens toward the dreaded “fiscal cliff,” I’ve also been deluged by callers to my radio show who wistfully recall the higher top taxes of the Nifty Fifties as an instant cure for the current crisis.
The problem with this odd wave of high tax nostalgia is that it ignores one crucial fact about the Eisenhower era: higher rates on a few wealthy taxpayers didn’t produce higher revenues and the overall tax burden on the public was actually lighter, not heavier, than it is today.
Official federal figures show that in the last three years of the Eisenhower administration (1958-60), tax payments to government at all levels averaged 28% of the gross domestic product. Today, that number tops 32%, with further increases anticipated for 2013-14. Complaints about “third rate public services,” in other words, have no connection to reduced resources for federal, state or local bureaucracies.