20210426_Tax_Rate_IBT Historic highest marginal income tax rates in the U.S.* Photo: Statista/IBT

The New York Times has reported that President Biden is seeking to increase taxes on the rich in order to fund spending on childcare and education. Dubbed The American Family Plan, it is expected to involve investments aimed at reducing poverty, lowering childcare costs, putting a national paid leave program into place and making both prekindergarten and community college free. It would be offset by nearly doubling the capital gains tax for people earning more than $1 million annually while the top marginal tax rate would be increased from 37 percent to 39.6 percent.

Proponents of higher taxes on the wealthy have been pushing for a marginal tax rate increase for years with Representative Alexandria Ocasio-Cortez proposing a rate of 70 percent back in early 2019 ahead of the World Economic Forum. Despite the plan receiving an icy reception in Switzerland, the notion actually had majority support in the U.S. with polling from The Hill/HarrisX finding that 59 percent of the public favored a 70 percent marginal tax rate with 45 percent of Republicans also behind it.

Tax measures like the one Ocasio-Cortez floated in 2019 used to be standard in U.S. economic life. For example, the highest marginal tax rate for the highest-earners near the end of the Second World War was 94 percent while and it was still as high as 91 percent in the early 60s. That all changed under Reagan when he slashed taxes, resulting in the marginal rate plummeting to 50 percent in 1982. Since 1987, it has remained low, never rising above 40 percent, according to data from the Tax Policy Center.