March Madness, But For the Tax Code
Let's talk about tax brackets
Happy Tax Day! Today’s a day of celebration in our household since my fiancée and I met in tax law class — love in a hopeless place etc etc.
I have a short piece out for MS NOW today that comes ahead of a longer brief for the Roosevelt Institute. In short, our country used to have way more tax brackets — up to 56! But now, we only have seven. Expanding the number of brackets we have would allow policymakers to address income inequality, issues of tax equity, and help raise much-needed revenues.
An excerpt of the piece is below along with a link to the full thing.
Some of the basketball fans who watched the University of Michigan dominate last week’s NCAA men’s basketball tournament or saw UCLA win the women’s bracket may believe that those tournaments have always started with 68 (or at least 64) teams. But there used to be a lot fewer teams — and a lot fewer brackets — for those tournaments. The original men’s tournament, played in 1939, tipped off with only eight teams. As the sport spread and became more popular, more competitive and more stratified, we eventually got to a round of 64. And not only that: Four more teams play for the chance to get into that round.
As the basketball tournaments’ brackets have become more expansive, the U.S. tax code has essentially worked in the reverse. At its peak, from 1918 to 1921, the United States had 56 tax brackets. But today there are only seven. This quiet collapse in the number of tax brackets has come along with a new Gilded Age fueled by growing income inequality. While March Madness has come and gone, April 15 — Tax Day — is a good time to examine this madness in our tax code.
Let’s start with how we got here. Since the Clinton administration, every U.S. president has passed significant tax legislation, but the basics of the federal income tax have changed little: We’ve gone from five to seven tax brackets, and the top marginal tax rate has bounced between 35% and 39.6%. By historical standards, these are minor changes. From 1916 to 1986, on average, the U.S. had more than 27 different federal income tax brackets each year and a top marginal tax rate of 70%.
It is time to bring back that norm of the past…read the rest!