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Top and Bottom US Federal Income Tax Rates Since 1913

By Len Penzo

taxpenaltiesAnd you thought tax rates on regular income were outrageous today. Take a look at how high the top and bottom income tax rates for both were 70 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 39.6% and 10%, respectively, in 2015.

In 1913, when the income tax was initiated, the top tax rate was just 7% on earnings above $500,000 — that’s $11 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 $1.2 million today, so I guess the government giveth (in the form of lower rates) and taketh away (via a top tax bracket that is more than $10 million lower in inflation-adjusted dollars than it was in 1913).

So, all in all it’s pretty obvious that the federal government taketh a lot more than it 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

March 26, 2015

Comments

  1. 1

    Hugh says

    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.

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