The 2012 Fiscal Cliff Negotiations - Part 4: How Do the Tax Rates Threatened By the Fiscal Cliff Compare to the Boom Years of the Clinton Presidency?

The current stalemate over the fiscal cliff centers around intransigence on both sides on tax rates.

Some Republicans are willing to make concessions on eliminating tax deductions, even if most of those are popular with the middle-class. And after a resounding victory in last month's election, President Obama is unwilling to cut Social Security or Medicare benefits or allow capital gains tax rates to stay at historic lows.

But it is the marginal tax rate that causes the most consternation between the two groups.

Currently, the federal income tax rate for incomes over $388,351 per year is 35 percent.

Obama wants that to climb to 39.6 percent. Rates would also rise for incomes above a quarter million dollars per year.

While Republicans paint this plan as a tax hike, these are the levels taxes would return to if the fiscal cliff isn't averted. Obama wants to preserve the Bush-era tax cuts for the bottom 98 percent of incomes and let them expire for the wealthy.

Republicans insist this will cause irreparable harm to the economy. But how would the new rates compare to the most recent economic boom--the Clinton years?

New Rates, Same as the Old Rates
The Bush tax cuts dropped federal income tax rates from their previous levels, which were set under President Clinton.

Clinton took office in 1992, when the highest tax bracket was 31 percent, after Reagan had succeeded in dropping them from a whopping 70 percent down to 28 percent during the 1980s.

George H. W. Bush famously raised taxes, bringing them up to the 31 percent Clinton was met with.

In 1993, Clinton was able to push through tax increases, bringing the top rate to 39.6 percent, where they stayed throughout the 1990s, a period that saw impressive and explosive economic growth.

George W. Bush slashed tax rates across the board, and a decade of sluggish growth followed.

Of course, even the 70 percent rates paid by the wealthiest Americans were low compared to other periods in the 20th Century. The highest rate hit 94 percent during World War II, and they stayed at 91 percent throughout the entire baby boom. They stayed in the 70s until Reagan.

Current tax rates are lower than at every point since the inception of the income tax, with the exception of 1925 to 1932, and 1988 to 1991.

The first period precipitated the Great Depression, and the second was quickly undone by Reagan's successor during a recession.

Tax rates aren't the only factor contributing to economic health, but if anything, history shows that higher tax rates are better for growth, not lower.