Comparing Income, Corporate, Capital Gains Tax Rates: 1916-2011

by Catherine Mulbrandon on January 24, 2012

Due to popular demand, I have updated my 2010 graph on top marginal tax rates. In addition, during this year’s tax season, I will be selling copies of my Top Marginal Tax Rates graph as a tabloid size 11″x17″ poster. If you would like to be notified when this poster is available please sign up!

If you would like to be notified when this poster is available please sign up!
FYI, your marginal tax rate is the rate you pay on the “last dollar” you earn; but when you view the taxes you paid as a percentage of your income, your effective tax rate is less than your marginal rate, especially after you take into account the deductions and exemptions, i.e. income that is not subject to any tax.

Tax Data: Married filing jointly, Capital Gains & Regular, Historical Corporate, Corporate Tax Schedule (page16) pdf

Tagged as: IRS, Line Graph, Tax Rates, United States

Anonymous

Dear Catherine, this chart is extremely interesting for me as I also study US income (amondg other things in connection with the crisis – long cycle etc.) How can I get it in a more easily readable format? Or probably in excelll? If I were use it I ‘ll put your name – as the author – on it – off course. Can you herlp?
http://www.facebook.com/people/Daniel-Murphy/100000901937251 Daniel Murphy

If you graphed these rates against, say, real GDP per capita, median wage income per capita, per capita employment, and cumulative business investment per capita, would you find that lower top marginal income tax rates, lower capital gains taxes, and lower corporate rates spur investment, growth, and employment … or not?
Anonymous

This graph is meaningless. Nobody paid the huge marginal rates that are shown in the 1960′s.

Go look at Nixon’s tax returns from that time. He made well over $1M in today’s dollars, and paid just $26% (1970) and 23.2% (1971) in taxes.

Roosevelt in 1935 earned $1.1M in today’s dollars, and paid just 22% of that in taxes. And yet the chart suggests that he should have been paying somewhere around 70% on his last dollar earned. Hah.

Ironically, our president today is paying higher effective tax rates that both these guys. President Obama’s 2010 taxes had an effective tax rate of 26.3%.

Thus, there is indeed a lot of truth to the statement that today’s millionaires are paying more in taxes than any other time, except for the late 70′s early 80′s. Jimmy Carter paid 35.9% effective tax rate in 1979, and Reagan paid 31.1% in 1985.

Why not graph effective tax rates? That is what really matters. The graph above suggests people used to pay a lot in taxes in the 50′s and 60′s. They did not. Ever. There were so many tax shelters available back then that it was easy for most everyone to avoid the higher tax rates.
Anonymous

To present ‘information’ about marginal tax rate with recognizing the change in deductions is at best ignorant and at worst deliberatively deceptive.

When Reagan lowered the marginal rate, many deductions such as personal interest or multiple vacation homes were eliminated. At the time some, myself included, were concerned that in the future Democrats would try and raise the rates back up by just comparing marginal rates. I hate being right.
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Anonymous

YOU need to look at Nixon’s returns – he was a notorious tax cheat who paid only 0.5% in 1970 and 1971 and 1.5% in 1972 thanks to false deductions, AND he evaded state income taxes, until he was reaudited in 1974. He was eventually forced to pay nearly 60% of his gross income for 1970-1972. Gerald Ford, immediately after Nixon’s resignation, paid 42%.

Way to defeat your own point.

Plus if you’re going to talk real dollars, you need to consider the chart in real dollars as well, where a million in 2012 dollars isn’t anywhere near the top bracket before 1980 – for instance, the 91% rate in 1955 was 1.6M in 1955 dollars, or $13.5M 2012 dollars.
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