Don't Punish the Rich

Greg Mankiw:

How much of the increase of the the reported incomes of the superrich might be attributable to cuts in their marginal tax rates? Let's do some very rough calculations to illustrate the possible magnitude of this phenomenon. I will start my analysis before the first in the series of major tax reductions, which was the famous Kennedy tax cuts.

Over the past half century, the top marginal tax rate has fallen from 91 percent in the 1950s and early 1960s to 35 percent today. Thus, the amount a person gets to keep at the margin has risen from 9 percent to 65 percent, that is, by a factor of 7.2.

That factor is about to decline very soon.