The Corporate Tax Hike of 1932 on Small Business
From 1918 until 1931, the U.S. had a flat tax on corporate income, with a tax rate of 0% for the first $2,000 of income from 1918 to 1927 (equivalent to $26,000 today), and a tax rate of 0% on the first $3,000 of income from 1928 to 1931 (equivalent to $43,000 today), see IRS data here. Starting in 1932, the lowest rate was increased to 13.75% on all income (see chart above).
A small company making $43,000 (in today's dollars) in profits would have paid no corporate income tax in 1931, but would have paid almost $6,000 in 1932 (today's dollars). A small company making $100,000 in profits (today's dollars) in 1931 would have paid less than $7,000 in tax (today's dollars), but almost $14,000 in taxes in 1932, a two-fold increase in one year, as the top rate increased from 12% to 13.75%, and the 0% rate was eliminated.
For an economy struggling with a stock market crash, thousands of bank failures, and rising unemployment, it would seem like the last thing considered would have been such a huge tax hike on all businesses, but especially small businesses.By 1941, the bottom rate on the first $5,000 of corporate income was 21% and the highest rate was 44%, and the initial pro-business flat tax became an anti-business progressive tax system.