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

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.  

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 (page 16) pdf

Top Marginal Tax Rates 1916-2010

See the Updated Version for 2011 here.

Green line is the top marginal rate for married couples filing jointly (most years dividends were tax like ordinary income until 2003), orange is the top rate for income from capital gains. The top corporate tax rate is included for comparison. 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.

Over the years, changing the amount of taxes people pay was accomplished not just by changing rates but by changing the income limits of the tax brackets. Just looking at the top rates does not give the whole picture about who is paying taxes. Before the 1986 tax reform, the income tax had 15 brackets. In the 1930s, there were more than 50. The Wealth Tax Act of 1935, applied the top rate to income over $5 million and had only a single taxpayer: John D. Rockefeller, Jr. As the number of tax brackets decrease, the the top rate was applied to more people over the decades. Since 1987 the income tax brackets were combined so now more than a million people "qualify" for the top marginal rate. If you are interested here is the first 1040 form for 1913.

Tax Data: Married filing jointly, Capital Gains & Regular,Corporate

Reminder: April 30th is the last day you can pledge to my project: An Illustrated Guide to Income in the United States @ Kickstarter

Addendum: Rolled-back the 2009/2010 capital gains marginal rate to 15%

Percent of Households Filing an Income Tax Return: 1913-2008

A federal income tax was imposed on several occasions in the 1800s. However, in response to a court case which determined that income from property was required to be imposed in proportion to states' population, Congress proposed the Sixteenth Amendment. Thus in 1913, the modern income tax system was born. In 1913, 358,000 returns were filed which was 2% of all households. While the top tax rate was 7% on incomes above $500,000 ($10.9 million in 2010 dollars), the first $3,000 ($65,331 in 2010 dollars) was exempt from the the income tax for single persons.

In 1918, 4,425,000 returns were filed which was 20% of households. Now the exemption was $1,000 ($14,352 in 2010 dollars) while the top rate of 77% was now applied on income over $1,000,000 to pay for World War I ($14.3 million in 2010 dollars). There was high inflation during and right after the war so by the peak in 1923 almost 40% of households were being taxed due to bracket creep. This was fixed in 1925.

In 1942, 36,619,000 returns were filed and the exemption had been dropped to $500 for single persons ($6,613 in 2010 dollars). For the first time the number of income tax returns filed exceeded the number of households.

Data: Top Income Tax Rates; Tax Exemptions; Number of Tax Returns; Number of Households

Average Tax Rates on Salaries up to $1,000,000 [2009]

I wanted to try out the new Tableau Public so I took the Average Tax Rates I calculated for my Comparing Rates by Income series and created this little graph. A couple disclaimers: I am assuming standard deduction and exemptions for the children and/or spouse in each example. Also I am combining all the taxes applied to your salary including: Income, Social Security, Medicare, and Payroll (paid by your employer). Since this is a live, interactive chart you can hide/show each line using the check boxes at the bottom of the graph. Sheet 1

Powered by Tableau

Type of State Income Taxes [Tax Foundation]

From Tax Foundation found via My Money Blog

• Blue States have a Millionaire's Tax
• Orange States have a Flat Tax
• Yellow States have either limited or no Income Tax

U.S. Income Tax Brackets: 1910-2010

This Heat Map of Tax Brackets was created by Stephen Von Worley over at WeatherSealed found via @Brainpicker The brighter the color the higher the tax rate. Notice that the income plotted on the y-axis is a log scale.

Comparing Marginal Tax Rates Including Payroll Taxes: 2009

Updated April 13, 2010:  I don't think my original labels were clear so I tried to fix it with new labels and I reorder the graphs. This is a new infographic illustrating the marginal federal tax rate applied to different salaries. It shows the difference between the combined rate levied on an employee (Income + SSN + Medicare marginal tax rate) and the additional rate levied on the employer, i.e. the payroll tax (SSN + Medicare tax) I am using the same examples that I created in the previous six graphics looking at the average tax rate.

Average Tax Rates for Married with Two Kids and One Income: 2009

The sixth in series of infographics I am designing to illustrate the average federal tax rate applied to different salaries. This time I am graphing the average tax rates for a married couple with to kids and one salary. With 2 kids there are 2 more exemptions which increases the income tax cut offs for all tax brackets compared to the married with no children graphic.

If you take a look at your W-2 form you can see that there are 3 different taxes applied to salaries and wages:

The income tax graph is created from the 2009 tax schedule for a couple filing jointly or qualifying widow(er):

which you can find from the IRS Tax Tables here while the information about the social security and medicare tax can be found here.

Average Tax Rates for Head of Household: 2009

The fifth in series of infographics I am designing to illustrate the average federal tax rate applied to different salaries. This time I am graphing the average tax rates for a Head of Household with one child. The difference between this graph and the couple with one income is the smaller standard deduction and lower cut offs for 10%, 15%, 25%, and 28% rates both of which raises their average income tax rate.

The income tax graph is created from the 2009 tax schedule for a Head of Household:

which you can find from the IRS Tax Tables here while the information about the social security and medicare tax can be found here.

Average Tax Rates for Married Filing Separately: 2009

The fourth in series of infographics I am designing to illustrate the average federal tax rate applied to different salaries. This time I am graphing the average tax rates for someone while married is filing a separate tax return from their spouse. The difference between this graph and that of a single taxpayer is that the cut offs for 28%, 33% and 35% rates are lower which will increases the average tax rates for people with an income over $78,000.

The income tax graph is created from the 2009 tax schedule for someone married filing separately from their spouse:

which you can find from the IRS Tax Tables here while the information about the social security and medicare tax can be found here.