And you thought tax rates on regular income were outrageous today. Consider how high the top and bottom income tax rates for both were 80 years ago. Yikes!
In 1944 and 1945, taxpayers handed over 94% of their hard-earned income to the federal government on any gains falling within the highest tax bracket. Meanwhile, even the lowest-earning workers at that time were paying a 23% tax on income falling within the bottom bracket. Compare that to 37% and 10%, respectively today.
The initial US federal income tax top tax rate in 1913 was just 7% on earnings above $500,000. That’s $14 million in today’s inflation-adjusted dollars. As for the lowest tax rate, it was just 1%.
Ah, the good ol’ days.
By the way, the $200,000 top income tax tier for 1970 is equivalent to a little more than $1.4 million today.
Now compare the 1913 and 1970 top tax bracket income thresholds to today’s top income bracket of just $578,125. Ouch.
So … what can we conclude from all of this? I guess the bottom line is that the government giveth (in the form of lower rates) and taketh away (via a top tax bracket that is roughly $13.4 million lower in inflation-adjusted dollars than it was in 1913).
That being said, all in all it’s pretty obvious that the federal government has taketh a lot more than it has giveth away.
For what it’s worth, the capital gains tax rate has moved up and down over the years too.
Photo Credit: John-Morgan
It’s obvious that the initiation of the income tax is what has allowed Washington DC to expand its power far beyond what is allowed by the Constitution. 1913 was a terrible year for the US because it was the year the Fed and the income tax were both born.
Yep. Those two acts – coupled with breaking the US dollar’s anchor to gold in 1971 – fundamentally changed America forever by unleashing the federal government to become the unwieldy and out-of-control behemoth that it is today.
Add to that the fact that in 1967 the federal government reached an agreement with the Saudi royal family. In return for guaranteeing they remained on the throne, the Saudi family tied the price of oil to the American dollar. Resulting in it becoming the world’s reserve currency. It opened the door for out of control spending. Now that the Saud’s are talking about changing the reserve currency, the US Dollar will return to our shore by the trillions. We haven’t seen anything yet.
When income tax rates hit 95%, there were so many loopholes, and deductions that only people without a good accountant paid anywhere near that.
Now, Social Security is subject to income tax. When they figure up your total income to determine if you’ll pay taxes on it, they even include tax free earnings such as municipal bonds. It’s a total ripoff.