To answer this question we will dig in History to get some initial idea of what portion of private production could politicians (especially some) have in mind to subtract and how high the American citizens permitted them go in confiscating the fruits of their work. And then you can get surprised, 90% is possible! If you check the American Tax Records it is amazing how high they went, as you can see in the chart below:
As you can see, when severe structural (1930-194?) or temporal (1916-1918) fiscal deficits appear making the Federal Debt explode, the Top Marginal Income Tax just follow them. Cause-effect? Well, yes in the sense of how difficult it was to finance such a gigantic debt: under Gold Standard was more difficult as under low inflation also, as inflation may help to pay debts (for the prove click here) The USA is (as the UK) clearly trying to inflate the Economy in order to avoid tax pains, let’s see if it works.
Drive a Country to higher Taxes, they are: an extended major war (or wars), an economic collapse and a prolonged mismanagement of Public Finances. The USA has suffer the first two and scaling, as in WWII the first two coincides or followed one to each other while now, thinking in the Health issue and the growth of bureaucracy and the crashes and wars in the M.E., it seems both three take inexorably to higher income taxes.
The Progressive Taxing System.
Traditionally, there was no progressiveness in taxation even when the criteria were efficacy and justice in collecting the funds to finance the State and imposing charges to citizens. But, with the contribution of Keynes in his work on Marginal Propensity to Consume, higher tax rates as Income is higher affect less Consume became logic; that is why the tax function related to Income turned more curved till 1946, as you can see in the chart below where the income data is in real terms with dollars of 2011.
The Obama Perspective:
As a Democrat his tradition is in the line of Roosevelt to whom all of his comrades get inspiration and love to emulate. So, thinking about them I have prepare you a chart with a dot light blue curve that goes from the actual situation to one intermediate between Roosevelt and Carter.
(click chart to details)
© Luis Riestra Delgado 10/03/2.012. Link for the Spanish version.