Microsoft co-founder and CEO Bill Gates recently said that when higher taxes are implemented on wealthy Americans, the country’s economy generally does better. PolitiFact looked into the claim, and it turns out that Gates was mostly correct.
“The highest income growth decade was the 1960s,” said Gates on CNN. “Income tax rates were 90 percent. I mean, the idea that there’s some direct connection that all these innovators are on strike because tax rates are at 35 percent on corporations, that’s just such nonsense.”
During the mid-20th century, marginal income tax brackets were the largest ever, and the fairest. Essentially, if someone makes more money, they’re taxed more money. It was fair, and no millionaire was ever put into the poor house because of high taxes. PolitiFact compared the country’s Gross Domestic Product from the Bureau of Economic Analysis with tax rates by decade from the IRS.
The 1960s enjoyed the highest GDP growth rate in the previous seven decades at 4.36 percent. Until 1964, the income tax rate was 90 percent for people who made at least $400,000 a year. That year, the income tax rate decreased to 77 percent, decreased again to 70 percent, and was followed by another increase back to 77 percent.
To clarify, though Gates had the right idea that higher taxes contributed to economic growth, the income tax rate wasn’t a solid 90 percent throughout the entire decade. However, this isn’t to say Gates is lying, this small discrepancy doesn’t undermine his argument as a whole.
PolitiFact noted that higher income taxes isn’t the sole reason for a better economy and that the health of an economy is dependent upon various moving components. Not only do energy costs and interest rates play a part, but there are international factors at play.
One thing is certain, when more taxes were imposed onto the wealthy, the American economy and infrastructure were better off. That’s a fact.
