The last time the top income tax rate was 39%, the United States enjoyed a booming economy, rising incomes, low unemployment and expanding budget surpluses.
Unfortunately, that simple truth has been ignored by Republican propagandists and mainstream media alike during the debate over President Obama's stimulus plan and budget proposal.
In his budget, Barack Obama has basically called for the status quo ante Bush when it comes to the taxes paid by upper income Americans. By letting the 2001 Bush tax cuts expire after 2010, the income tax rate for families making over $250,000 a year ($200,000 for individuals) would return to a top tier of 39.6% from its current 35%. (Unsurprisingly, the 1993 Clinton deficit-cutting package similarly received zero Republican votes in Congress.) Reversing the 2003 reduction to 15%, the capital gains tax rate would return to its Clinton-era level of 20%.
And during that Clinton era, the rich - and just about everyone else - did quite well indeed. The Clinton years brought the longest economic expansion since World War II, producing 22 million jobs and bequeathing an unemployment rate of only 4.2% to George W. Bush. On average, GDP growth under Clinton was the best since the Lyndon Johnson. While the national debt tripled under Republicans Ronald Reagan and doubled under George W. Bush, Bill Clinton balanced the budget in 1998 and produced a $236 billion surplus in 2000. And to be sure, the investor class profited handsomely, as the S&P 500 grew 15.2% annually during Clinton's tenure in the White House, the highest of any modern president. (In contrast, the S&P tumbled 5.6% per year under George W. Bush, the man who "presided over the weakest eight-year span for the U.S. economy in decades.")

But listening to the press, pundits and Republican politicians bloviate about the Obama tax plan, you'd never know it.
While the Los Angeles Times asked if Obama's budget was "taxing for fairness or class warfare," House Minority Leader John Boehner denounced it as a "a job killer, plain and simple." Despite the fact that the just passed $787 billion recovery package President Obama delivered as promised tax cuts to 95% of American families, Senate Minority Leader Mitch McConnell falsely proclaimed, "when our good friends on the other side of the aisle say raising the taxes on the wealthy, what they are really talking about is small business." Even as the AP concluded that the "Obama plan brings cries of class warfare," the Politico shrieked, "class warfare returns to D.C."
Of course, during the Bush years, a class war was under way, but only side was fighting it. While income inequality consistently worsened through the Clinton and Bush administrations, the Bush tax cuts had delivered a third of their benefits to the wealthiest 1% of Americans.
And as the New York Times detailed in 2006, the 2003 Bush dividend and capital gains tax cuts offered almost nothing to taxpayers earning below $100,000 a year. Instead, those windfalls reduced taxes "on incomes of more than $10 million by an average of about $500,000." As the Times revealed in a jaw-dropping chart, "the top 2 percent of taxpayers, those making more than $200,000, received more than 70% of the increased tax savings from those cuts in investment income." So it should come as no surprise that the income share of the 400 richest Americans doubled over the past decade.
Which is just one more reason why the wealthiest Americans, those who did so well under President Clinton and even better under George W. Bush, can and should return to their Clinton-era tax rates. Even with President Obama's proposed decline in itemized deductions to 28% (one which, despite the wailing of conservatives, will not adversely impact charitable giving), the investments and entrepreneurship of the country club class will be proceed apace.
Together, the data provide an existence proof to counter the fallacies of the Republican right. Just as the record makes clear tax cuts do not increase government revenues, recent history shows that in the past higher taxes for those at the top were no barrier to sustained economic growth and full employment. Of course, to that you can add one other inescapable truth: Wall Street and the overall economy almost always do better under Democratic presidents.
UPDATE: On Monday, ABC profiled some of the new schemes of wealthy Americans to avoid higher tax bills under the Obama plan.