Allow me to clarify - in talking about "successes", I was referring to economic success, essentially GDP growth. And here's a graph on that topic:

http://media.zenfs.com/en/blogs/thesignal/Top-Marginal-Tax-Rate-and-GDP-Growth.png">

There was more variability back before certain stabilising factors were added in the 80s and 90s, but the highest GDP growth since the end of WWII occurred when the top marginal tax rate was over 90%. And if you look closely, GDP growth often gets boosted in the short term by a tax cut, but it's always short-lived. Growth after tax increases doesn't seem to be reduced.

If you plot tax rates against smoothed GDP growth rate for the period following it, you get an interesting result. Here's a plot of average GDP growth rate for the 8 year period starting with the year on the x axis vs the top marginal tax rate in that year:

Notice that the trend is quite strong - GDP growth rate is decreasing as tax rates decrease.

I'm sorry, but that's *proportion* of federal taxes. We're talking total taxes. Furthermore, the top 3% of taxpayers includes a large bloc of people who don't fall into the top tax bracket, making it a very coarse comparison.

Let me make this point for you. If you have two people, and one pays $10 and the other pays $20, then the second person is paying just under 67% of the total amount paid. If one now pays $20 and the other pays $40, the percentage of total hasn't changed... but the amount being paid has doubled.

Here's a graph, from Wikipedia, of average net tax rate paid by the top 0.1% and 0.01%:

As you can see, in the 1950s it was significantly higher than in the 2000s. Here's a graph of all marginal tax rates in 1958 and 2009:

As you can see, there were more tax brackets in 1958 going up to a much higher taxable income (adjusted to 2009 dollars). At the same time, income for the top earners was lower, on average. As a result, a lower apparent tax rate occurs than would otherwise happen - this is why, in 1958, even the top 0.01% of earners were only paying, on average, less than 50% in tax.

You're obviously more knowledgeable in economics than I am, but I have a question regarding spending. If one's spending the same amount and taxing less I would think the GDP growth rate situation would be much different than if they're spending more and taxing less, and government spending in the U.S HAS been increasing. Of course, you might be right that taxes must increase, but I wouldn't say that spending is not a problem or at least the amount. One of the things that has been causing this is that the government keeps messing with the debt ceiling. This enables the government to keep borrowing and borrowing without taxation, and hence our growth rate is low, because the dollar is devalued. So I don't think one solution: decrease spending or increase taxes is the solution. The real solution is to limit the government's ability to enable itself without accommodating for this with tax increase by borrowing printed money.

it's much more simple than that, all you would have to do is raise interest rates and the borrowing problem would go away pretty damn quick.

@Aielyn

I don't think you understand ...

Up until the 1980s the marginal income tax rate on the wealthiest Americans was very high, but there were a lot of write-offs and loopholes that dramatically lowered the effective tax rate. In the 1980s the tax code was changed dramatically to eliminate these loopholes and reduce the marginal tax rate. If the United States increased tax rates to the level of the 1960s without re-introducing the loopholes it will cause substantal negative impacts to the economy due to capital flight.

I like this different perspective and think it's a unique approach. Thank you.

I agree with you about the Fiscal Cliff being akin to smoke and mirrors, at least for now. I can't find myself taking the situation too seriously. I guess because our media and news outlets now have taken to blowing everything so out of proportion just simply to create fodder for whatever outrageous or otherwise politically panderous discussions are out there. I'm not apathetic just yet. I still vote and give a damn. I don't give enough of a damn to care what other people say I should give a damn about... mainly because nothing is getting done.

Where politicians say an issue is developing, I see pandering to get votes and more TV time. Where people say there is a fiscal cliff, I see a countdown on CNBC, as if we're all marching towards a firing squad, getting ready to be taken out one by one...  and the news covers this all as if it nothing more than a plot twist in a political soap opera. Yes, we have serious problems. It's hard to solve them with all the political distractions and pandering. The media doesn't help either, they boost their own ratings by keeping politics controversial and encouraging people to get upset about everything. I don't care who is to blame, I just think things are stagnant as they are. Both parties are trying to win the war on appearances only, not really by focusing and finding solutions to the actual issues.

we will be alright! Trust in Obama!

I need to correct you first on a major misunderstanding that is really common amongst Americans, and that you've shown in this post.

The debt ceiling isn't about giving the government the ability to borrow more money. It's about giving the government permission to pay off the debt. I don't know the finer details of it, but public debt will continue to increase with or without raising the debt ceiling.

The fact that the debt ceiling keeps being raised is simply because debt is continuing to accumulate. The increasing debt isn't because of the raising debt ceiling. The raising debt ceiling is because of the increasing debt.

Furthermore, public debt doesn't devalue the American dollar. Two things can devalue the American dollar - reduction in investor confidence, and more American money being printed. The latter is something the government can control directly and causes massive inflation, the former is something it can only influence through policy and enactment of laws.

The argument from anti-tax crusaders is that investor confidence will increase if you decrease taxes. But the thing is, decreasing taxes will make the deficit (and therefore debt) problem worse, which will massively depress investor confidence. The unwillingness of government to do what needs to be done is also depressing investor confidence - politics over policy is bad for the economy (hey, that almost rhymes :P).

Decreasing spending in the short term is going to have to happen, as I already noted. Part of the reason for this is that public debt is larger than your GDP, which means that even if the government could take every single dollar from the economy for a year without destroying the country (and pretending that the economy itself wouldn't disappear within days of beginning this), it still would not be enough to completely pay off your debts.

But large amounts of spending cuts will also be devastating to the economy. Even if you ignore the rest of the economy, government spending is part of it, and with a GDP of around $15 trillion and spending of around $3.6 trillion, you'd see a GDP decrease of at least the order of 20% if the government ceased all spending. That's well beyond a depression. Of course, this is a case of reductio ad absurdum, but I think you get my point.

Oh, and I may seem knowledgeable about economics, but it's more that I'm very knowledgeable in mathematics, and am able to apply reasoning to economics. All of the finer details, I wouldn't have a clue about. Which is why I speak in terms of the broader details.

As the graph I provided in a post a couple back demonstrated, even with all of those loopholes, etc, the top 0.1% and 0.01% were still paying a much larger amount of tax than they are now.

I am not suggesting that America should return to 90% tax rates for the uber-wealthy. That would be excessive. But America could comfortably raise it to as high as 50%, bringing it into the same vicinity as most western nations, without causing any issues.

Of course, Capital Gains tax also needs to be fixed - that's an intentional loophole put into the system to benefit the uber-wealthy, and all evidence shows that it has not helped to encourage investment - it has only served to reduce the tax burden for multimillionaires and billionaires.

Under US law, an administration can spend only if it has sufficient funds to pay for it. These funds can come either from tax receipts or from borrowing by the United States Department of the Treasury. Congress has set a debt ceiling, beyond which Treasury cannot borrow. The debt limit does not restrict Congress’s ability to enact spending and revenue legislation that affects the level of debt or otherwise constrains fiscal policy; it restricts Treasury’s authority to borrow to finance the decisions already enacted by Congress and the President. Congress also usually votes on increasing the debt limit after fiscal policy decisions affecting federal borrowing have begun to take effect. In the absence of sufficient revenue, a failure to raise the debt ceiling would result in the administration being unable to fund all the spending which it is required to do by prior acts of Congress. At that point, the government must cancel or delay some spending, a situation sometimes referred as a partial government shut down.

I don't see anything about "paying off" but plenty about the restrictions on the Treasury to receive debt in order to pay off services. 

Although the Obama administration did say this. 

In addition, the Obama administration stated that, without this increase, the US would enter sovereign default (failure to pay the interest and/or principal of US treasury securities on time) thereby creating an international crisis in the financial markets. Alternatively, default could be averted if the government were to promptly reduce its other spending by about half.

Also a lot of this government spending doesn't go back into the economy, at least not efficiently. 

In 2009, the private sector was estimated to constitute 86.4% of the economy, with federal government activity accounting for 4.3% and state and local government activity (including federal transfers) the remaining 9.3%.While its economy has reached a postindustrial level of development and its service sector constitutes 67.8% of GDP, the United States remains an industrial power. The leading business field by gross business receipts is wholesale and retail trade; by net income it is manufacturing.

So they spend 38.9% as a percentage of the total GDP and the public sector is that small? How is that good? It seems to me as if a lot of this money is wasted somewhere, and hence the more efficient private sector would put it to much better use. 

edit: Government spending in the United States of America occurs at several levels of government, including primarily federal, state, and local governments. The Organisation for Economic Co-operation and Development (OECD) reports that total federal, state and local spending in the United States was $6.134 trillion in 2010.^[15]