Until very recently, there had been a growing bipartisan consensus, acknowledged at least implicitly, that you cannot run a high-tax [economic] regime and be competitive. The great unspoken fact is that [Rangel’s 4.6 percentage-point surtax on high incomes] only looks like a restoration of [Clinton’s tax rates]. But if the Bush tax cuts expire, the four-and-a-half points stays on top of the 39.6 [top Clinton tax rate]. So they are taking the rate to 44 percent. Then you add on 1.3 points [for the return of certain limits on tax exemptions], and if you are an entrepreneur another 2.9 points on top of that for the Medicare tax. So we are back to the 50 percent marginal rate under that plan.
James further notes that if the Democrats were to eliminate the income cap on Social Security, as some Dems have suggested, then the highest tax rates would climb to a staggering 60%. I remember what the economy was like during Carter’s one term where the highest tax rates were 50% – it was awful. My parents were trying to sell our house, and interest rates were insanely high – at around 18%. That’s like buying a house with a credit card. Needless to say, houses didn’t move at all back then, and my parents were forced to sell our house via land contract, a very risky move that, thankfully, worked out.