Simon from Maui emailed me last week about my recent post on federal debt and tax brackets:

Your chart triggered my pet peeve about certain graphs being on a linear scale when they should be plotted on a log scale. The problem is that growth over long periods makes many linear plots resemble a "hockey stick" when they really aren't. Also the nuances of what happened far back in time are often lost because the early part of the curve is under-represented.

Simon is right. Here's the same chart on linear and log scales.

This version shows the clear correlation between federal debt and personal tax brackets through the early 1960s. The cost of WWI drove up taxes, as did the debt burden of the New Deal and similar initiatives to ease the Great Depression. WWII drove taxes yet higher, with the top bracket above 90% from 1944 to 1963, a period that also included the Korean Conflict.

But in the mid 1960s we began to see a disconnect between federal debt and personal taxes. Students of the U.S. economy and financial markets have witnessed stunning changes over the past decade. As the divergence between debt and taxes continues to widen, the odds of additional economic shocks are probably increasing.

Simon also suggested that federal debt as a percentage of GDP would be a better overlay with the tax brackets, a view echoed by several other readers. We'll look at federal debt as a percentage of GDP in a future post. It's fascinating chart, although I don't think it offers as good a clue about the future for income tax rates as this overlay.