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Reagan's supply-side experiment may have just begun

Earlier this year there was a lot of talk about the Reagan administration's supply-side economic experiment having failed. That was shown, it was argued, by the length of the recession and the failure of federal revenues to soar upward in response to tax cuts.

That pronouncement was premature for two reasons:

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* The nation now has a vigorous recovery. The gross national product, the output of goods and services, rose at a handsome 8.7 percent annual rate in the second quarter, the strongest gain in two years.

* The experiment probably didn't really get under way until this year. Marginal tax rates - the percentage of gross income paid to Uncle Sam on the last dollar earned, which is the highest tax rate paid by an individual - are only now, with the 10 percent July 1 tax cut for individual incomes, taking a sizable dip for the average taxpayer.

At least that's the guess of Robert J. Barro, a professor of economics at the University of Chicago. He and a doctoral student, Chaiput Sahasakul, have found that average marginal tax rates have increased steadily over the last six decades, reaching 30 percent in 1980. That year is the latest for which the Internal Revenue Service has detailed data.

However, taking a nonscientific look at inflation and tax changes in 1981 and 1982, Professor Barro figures there would have been little change in the average marginal tax rate. There were cuts in income tax rates. But social security taxes, both the rates and the taxable base, increased. And inflation tended to shove many into higher tax brackets.

This year is different. Inflation is extremely low. The social security base went up, thus boosting those taxes by a maximum $221 for those making over $32, 400 a year. But the 10 percent tax cut more than offset this for most people. So marginal tax rates likely dropped on average.

Thus, if the supply-side experiment has only begun, it cannot be said to have failed or succeeded.

The supply-side economists held that the nation needed a drop in marginal tax rates to encourage businessmen, professionals, and employees to work harder and longer. Taxes were so high, they said, that they discouraged enterprise and extra work. Of course, the Reagan-backed cut in the top tax rate on unearned income from 70 to 50 percent did help a small minority of mostly well-to-do taxpayers. But this would not have been enough to drag down average marginal tax rates considering the other factors boosting these.

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In any case, a paper by Barro and Sahasakul for the National Bureau of Economic Research shows that Americans have been paying higher and higher marginal tax rates.

''From a value of about 1 percent in 1916,'' they find, ''the average marginal tax rate rises along with major increases in the tax rate schedule to a peak of 5 percent during World War I. Then, because of a series of rate reductions through 1929 and the declines in income for 1930-31, the marginal rate falls to a low point of less than 2 percent in 1931. Subsequently, the rate rises sharply to reach 5 percent by 1936.''

In 1940, the rate is still below 6 percent. It climbs to a peak of 26 percent during World War II. After the war it declines to a low point of 18 percent in 1948-49.

During the Korean war, the average marginal tax rate peaks at 25 percent. It then moves from 22 percent in 1954 back to 25 percent in 1963. In 1965, what the authors refer to as ''the famous Kennedy-Johnson tax cuts'' reduce the rate to 21 percent. But the growth in nominal income and the Vietnam surcharge raise the rate to 25-26 percent again in 1968-69.

After the surcharge is removed, ''the effects of bracket creep increase the rate steadily from 24 percent in 1971 to 31 percent in 1978.'' In 1979, the rate falls back to 29 percent, ''apparently because of a widening in the tax brackets , although there are no changes in the lowest and highest tax rates.'' But in 1980, the rate goes up to 30 percent.

That means, the average taxpayer kept 70 cents of the last dollar he earned in 1980 for himself (or for state and local tax collectors). Thirty cents went to Washington. Of course, the average federal tax rate on all his income was lower than 30 percent. Average tax rates are the percentage of total federal income taxes levied on aggregate personal income. This average amounted to 30 to 40 percent of the average marginal rate over the 1916-79 period.

Another point the authors make is that more and more taxpayers have shifted into relatively high marginal tax rates. For instance, they note that the fraction of ''adjusted gross income'' that was taxed at marginal tax rates exceeding 35 percent. That figure was 8 percent in 1964 and 31 percent in 1980. Looking at this another way, in 1964, 1 percent of returns were marginally taxed at 35 percent or more; in 1980, the fraction was 10.1 percent. So the fraction of returns facing higher marginal rates rose by a factor of 10 from 1964 to 1980 .

With this sort of increase in the tax burden, it is perhaps no wonder that the nation has seen something of a tax revolt in the last few years. Marginal tax rates in the United States are not high by comparison with many European nations. But they have gone up rapidly.