The Economic Recovery Tax Act of 1981 slashed the highest rate from 70 to 50 percent, and indexed the brackets for inflation. Over the next three decades, the top federal income tax rate remained high, never dipping below 70 percent. In 1944, the top rate peaked at 94 percent on taxable income over $200,000 ($2.5 million in today’s dollars 3). War is expensive.Īfter the war, federal income tax rates took on the steam of the roaring 1920s, dropping to 25 percent from 1925 through 1931.Ĭongress raised taxes again in 1932 during the Great Depression from 25 percent to 63 percent on the top earners.Īs we mentioned earlier, war is expensive. The highest income tax rate jumped from 15 percent in 1916 to 67 percent in 1917 to 77 percent in 1918. participation in World War One, Congress passed the 1916 Revenue Act, and then the War Revenue Act of 1917. In 1913, the top tax bracket was 7 percent on all income over $500,000 ($11 million in today’s dollars 1) and the lowest tax bracket was 1 percent. Sign up here.Īs Will Rogers said: “The difference between death and taxes is death doesn't get worse every time Congress meets.” Learn how to reduce your taxes – legally – with a free, no-obligation 7-day trial subscription to the Tax Reduction Letter. If you’re in business for yourself, you have a lot of control over how much you pay in taxes. The tax law, like almost all laws, grows as lawmakers use it for pork, try to make it fairer, use it to stimulate a sector of the economy, or just want to raise revenue. Click here to see the latest IRS Form 1040.
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