10X Increase in Lowest Tax Rate in Early 1930s

A previous CD post showed the highest marginal income tax rates during the Great Depression, which more than tripled from 25% to 79% between the early 1930s and 1936. The chart above shows the increases in the lowest marginal tax bracket between 1929 and 1940, which for all years applied to taxable income between $0 and $4,000. Starting from .375% in 1929, the lowest rate tripled to 1.125% in 1930, and then increased again by more than 3.5 times to 4% in 1932, for a total increase of more than 10 times.

In dollars, the income taxes payable on $4,000 of income increased from $15 to $160 between 1929 and 1932, a 10.667 time increase. In today's dollars that would be like a tax increase of more than $2,315, from $240 in 1929 to $2,555 in 1932, on income in today's dollars of about $64,000 (using the BLS Inflation Calculator here).

The increase in the lowest individual income tax rate from 1.125% in 1931 to 4% in 1932 would be equivalent to a $1,837 annual increase in today's dollars for someone reporting $4,000 of income in 1932 (equivalent to $64,000 today), from $718 in 1931 to $2,555 in 1932, whopping 255% tax increase in just one year! Even for someone reporting taxable income of only $1,000 in 1932 (equivalent to $16,000 today), the increase in tax liability would have been 255% in just one year.