Thursday, March 20, 2008

Highest Marginal Income Tax Rates, 1913-2007

Been working on your income taxes for 2007? If you're in a high income tax bracket (35% is the highest marginal rate for 2007), it could be a lot worse, you could be paying taxes at the rate of 91% like during the 1950s, or 70% during the 1960s (see chart above based on IRS data). Of course, it could be a lot better, like the 28% highest rate in the 1980s or the original maximum rate of 7% in 1913. (The average highest marginal tax rate since 1913 is 60.3%.)

Comment: Is is any wonder that the economic conditions in the 1930s turned from bad to worse, from a recession to the Great Depression, when the highest income tax rate was raised from 25% to almost 80% during that decade (see shaded area above)? Now that was a real "economic buzzkill."

7 Comments:

At 3/20/2008 9:48 AM, Anonymous Kevin said...

It's interesting how LOW the marginal rate was through 1931 by which point the depression was well entrenched.

 
At 3/20/2008 10:25 AM, Anonymous Machiavelli999 said...

Why is it interesting how low it was? The really interesting thing is why they raised it. I am sure it, along with other stupid measures like raising tarriffs, prolonged the depression.

 
At 3/20/2008 12:54 PM, Blogger VulcanHammer said...

You can't tax yourself out of a depression.

 
At 3/20/2008 6:27 PM, Anonymous Kevin said...

It's interesting dolt 999 that the low rates coincided not with growth, as supply siders argue, but with a DEPRESSION!

 
At 3/20/2008 8:58 PM, Anonymous Anonymous said...

Those high marginal rates were almost meaningless to people with non-wage income. There were so many investments with various tax preferences ("tax shelters") that overall marginal rates on various types of investment income was much more comparable to today. Sure they were higher than today, but they were nowhere near 70-90%.

The problem, of course, was that all those preferences steered capital towards things that had the most preferences rather than things that made the most sense.

 
At 3/21/2008 9:24 AM, Anonymous Anonymous said...

It would be interesting to add in state and city taxes too.

 
At 11/05/2008 3:02 PM, Anonymous Anonymous said...

In difficult economic times lowering taxes doesn't always work immediately. In difficult times raising taxes NEVER works.

Capitalism creates wealth. Governments almost always create. waste.

 

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