The other day I got into a debate with a progressive liberal friend of mine on facebook when he made a post saying government should increase taxes on the rich because higher tax rates on the top earners supposedly helped get us out of the Great Depression and made life better for lower and middle-class Americans. He also claimed that the economy worsened when taxes were lowered under Reagen, improved when they were raised under Clinton, and then got worse again when they were lowered under Bush Jr.

When I asked him if he was talking about income tax or capital gains tax (he never specified which), and whether he had taken into account the impact of the Federal Reserve on our economy, he got mad at me and accused me of advocating so-called "trickle-down economics," even though I had never used that term. I told him I didn't really know much about trickle-down economics except that it was a term often used as an alternate label for Reagan's economic theory which is rightly called supply-side economics, but that I was really more of an advocate for Austrian economics.

The argument went on for a little while, and it slowly became apparent to me that my friend had a very shoddy grasp of history, despite the fact that he's nearly twice my age (for example, at one point he claimed that the industrial revolution didn't occur until after the Great Depression).

Now on the one hand, there is a shred of truth to his argument about taxes, which is the history of the tax rate on the highest income bracket, as depicted by this graph:

http://www.ritholtz.com/blog/wp-content/...

My friend didn't use this graph in his argument (I looked it up just now), but this is nevertheless the tax history I believe he was talking about, as it matches up almost perfectly with his argument. Whenever progressives advocate raising taxes on the rich, they typically tend to rely on a chart or graph similar to the one above.

However, something I noticed is that this graph fails to take into account the fact that the number of tax brackets since 1913 has often fluctuated, with new tax brackets being added or eliminated over the course of time, usually at the whim of politicians. Another important point is that this graph does not distinguish between persons who are Single, persons Married Filing Jointly or Qualified Widow(er), persons Married Filing Separately, or persons who are filing as Head of Household. If we're really going to be looking at the history of top income tax rates in the U.S., wouldn't it be important to take these things into account? Also, what about capital gains tax? Isn't that important, too?

Anyway, I just think it's kind of interesting that progressives are often so quick to insist that they're economic experts, and that everything will be solved if we just raise taxes, when in reality the situation is much more complex than that.

It's also funny when they think that their opponents are operating on this same over-simplified graph as them, and that the only question in dispute is exactly what rate to tax the highest income bracket, which is why they accuse their opponents of advocating trickle-down economics: they think all we want to do is push the line on the graph down lower. The idea that we might actually advocate getting rid of income tax altogether -- not just for the highest income earners, but for everyone -- never occurs to them.