
U.S. Federal Individual Income Tax Rates History, 1862-2013 - lisper
http://taxfoundation.org/article/us-federal-individual-income-tax-rates-history-1913-2013-nominal-and-inflation-adjusted-brackets
======
Animats
Take a look at 1953. Top rate, 92%.

Consider the 1950s. President Dwight D. Eisenhower, the general in charge of
winning WWII in Europe, a Republican, and very much into heavy defense
spending. That administration developed, mass-produced and deployed nuclear
submarines, B-52 bombers, ICBMs, aircraft carriers, A-bombs, and H-bombs.
Bases were maintained all over the world, with large numbers of troops. Plus,
the US paid some of the costs of putting Europe and Japan back together, and
the interest on the national debt from WWII.

Financial regulation was tight. There were commercial banks, which could take
deposits and make loans, but couldn't trade in the stock market. There were
savings and loans, which could make loans on houses and take deposits but not
much else. There were stockbrokers, which could deal in stocks but not trade
for their own account. Most stockbrokers were partnerships, such as Merril
Lynch, Pierce, Fenner, and Beane, with the partners personally liable for
losses. There were a few investment banks trading for their own account, such
as J.P. Morgan. They were using their own money, and if they went under, that
was their problem. Finance was very clearly subordinate to doing real stuff.

The CEO of United States Steel made about $42,000 a year. The first
billionaire had not yet appeared; John Paul Getty, a Texas oilman, broke
through that barrier in the 1960s.

Yet this locked-down economy produced the greatest economic boom in American
history.

~~~
cpursley
Keep in mind that the rest of the developed worlds' infrastructure and
productive capacity had been bombed to oblivion. Of course it was a boon to
the American economy, despite the political situation. The US was the only
place left standing that could mass-produce complex goods in conjunction with
its new-found standing as the most powerful military. The world we live in now
is very different - it's flattened out. A large number of nations have either
matched or surpassed the US in both productivity and standard of living.

~~~
jordanb
Trade was a very small part of the US postwar economy. The economic boom was
almost entirely Americans making stuff and selling it to other Americans:

[http://graphics8.nytimes.com/images/2012/11/19/opinion/11191...](http://graphics8.nytimes.com/images/2012/11/19/opinion/111912krugman3/111912krugman3-blog480.jpg)

~~~
cpursley
You reinforce my point. Buying products from overseas was not viable because
their capacity was bombed to hell. Not many electric washing machines coming
out of these places after the war:

[UK]
[http://www.bbc.co.uk/schools/primaryhistory/world_war2/scotl...](http://www.bbc.co.uk/schools/primaryhistory/world_war2/scotlands_blitz/includes/resources/images/clydebank_ruins.jpg)

[Japan] [https://www.ibiblio.org/hyperwar/USA/USA-PR-Japan/img/USA-
PR...](https://www.ibiblio.org/hyperwar/USA/USA-PR-Japan/img/USA-PR-
Japan-447.2.jpg)

[Germany]
[http://cdn.history.com/sites/2/2013/12/berlin_ww2-P.jpeg](http://cdn.history.com/sites/2/2013/12/berlin_ww2-P.jpeg)

~~~
jordanb
You're making a case against free trade then.

If things were so good for so many Americans because we weren't trading with
anyone, then why'd we start?

------
applecore
Just a reminder: due to the exceptional circumstances following World War II,
the top marginal individual tax rate was around 90%. (The effective rate was
really about 70% for the highest incomes since so few paid actually the top
rate.)

This was largely to prevent war profiteering, though it lasted until 1964 when
the top marginal tax rate was lowered to 70%. It's not really relevant to our
times unless you're forecasting another global war, in which case all bets are
off.

~~~
ceejayoz
> It's not really relevant to our times unless you're forecasting another
> global war, in which case all bets are off.

According to [http://www.csmonitor.com/Business/new-
economy/2011/1025/Iraq...](http://www.csmonitor.com/Business/new-
economy/2011/1025/Iraq-war-will-cost-more-than-World-War-II), the Iraq war
will wind up costing "more than the $3.6 trillion the US spent to fight World
War II, even after adjusting for inflation". Add in Afghanistan and the
ongoing airstrikes and likely expansion into other areas of extremism, and
maybe we should start talking about Americans at home paying a bit for the
militarism in the form of higher tax rates.

~~~
MCRed
Is that an argument for higher tax rates or lower ones? After all, if you are
anti-war, would you really say tax rates should be higher so that we can have
more wars?

The weird thing seems to be that the people who are most anti-war want higher
tax rates for things that are not war, and then when the money gets spent on
war, they want even higher tax rates for the things they were originally
promised but didn't get.

Looking at tax history it seems like a repeating game of bait and switch.

------
ck2
Just a reminder that modern wars are done off the books without "pay fors"
that congress insists on for everything else or your taxes would be absolutely
insane. Like the $2 Trillion Iraq War.

~~~
MCRed
I'm not sure about the "pay fors" you're talking about, but I believe your
sentiment is correct-- and effectively, that $2T came out of the economy via
the hidden tax of inflation.

While people would be mad to see the $2T in direct taxation (what you called
"Absolutely insane") they do not realize it when it is done via inflation.
(Eg: your gas prices, food prices, everything else is higher, because the
government just printed the money to spend on the war, increasing the debt and
devaluing the dollar.)

From The Economic Consequences of the Peace: “Lenin is said to have declared
that the best way to destroy the Capitalist System was to debauch the
currency. By a continuing process of inflation, governments can confiscate,
secretly and unobserved, an important part of the wealth of their citizens. By
this method they not only confiscate, but they confiscate arbitrarily; and,
while the process impoverishes many, it actually enriches some. The sight of
this arbitrary rearrangement of riches strikes not only at security, but at
confidence in the equity of the existing distribution of wealth.” John Maynard
Keynes

~~~
jpgvm
Generally when new spending is proposed it needs to be budgeted and either
money repurposed from somewhere or new taxes introduced. This is sometimes
referred to as "pay-fors".

------
mgalka
Cool data source. Thanks for sharing. In case anyone is curious about the
early history of the income tax, or why it is so spotty prior to 1913:

The income tax was first imposed in 1861 to help pay for the Civil War. Prior
to that, the government got most of its income from excise taxes and tariffs.

In 1895, the Supreme Court declared the income tax unconstitutional, since it
was not apportioned fairly between states, which is why the government added
the 16th amendment in 1913, which gave it the power to impose an unapportioned
income tax.

~~~
brobinson
I still find it baffling that the USA has _not_ had a Federal income tax for
about half of its existence.

~~~
jordanb
During that time the US Federal Government was funded through tariffs and
through selling land on the western frontier.

~~~
brobinson
This is interesting because the federal government still owns a lot of the
land in the western half of the country. I saw an infographic recently
(sourcing a federal agency's statistics) which said that 48% of California's
and 88% of Nevada's land are owned by the federal government.

------
hihithere
God Damm, 90% tax rate!!

~~~
jeremyt
I see this kind of comment an awful lot, and I have two immediate reactions:

The first is a sort of dumb and dumber "we landed on the moon!" feeling where
I actually can't believe that someone didn't know that there used to be a 90%
marginal tax rate. Perhaps you live outside of the United States?

The second is that the 90% tax rate is completely misleading, as there were so
many deductions and loopholes that hardly anybody ever paid it.

Every time somebody brings up the 90% rate, it's always someone on the left
attempting a "We could raise tax rates a whole lot more; just look at how high
they used to be". It's one of the most disingenuous arguments in politics.

~~~
bmmayer1
There's also the point pg brought up in his most recent essay[1]:

"To some extent this was an illusion. Much of the de facto pay of executives
never showed up on their income tax returns, because it took the form of
perks. The higher the rate of income tax, the more pressure there was to pay
employees upstream of it."

[1] [http://paulgraham.com/re.html](http://paulgraham.com/re.html)

------
mtgx
Instead of having all of these tax brackets, which for all of the smart people
and companies they are meaningless anyway since they take advantage of the
hundreds and hundreds of loopholes (also called "deductions") so they don't
pay the full amount, why not have a flat 15-20% income tax for _everyone_
instead - rich or poor?

I think it would be simpler, more honest, more transparent, and more fair
(slightly favoring the rich, but it more than makes up or it in other ways).
You also wouldn't have these endless discussions about whether you should tax
the poor 10% (because the tax affects them more) and the rich 30%, or the poor
30% and the rich 10% (because they are the "job creators")?

A moderately fair flat 15% income tax for everyone. No deductions for any
special interest.

I'm not a huge fan of subsidies either, but if you really think you need to
"make it easier" for some vital or up and coming industries, then you could
give them some subsidies for a while. That would also be a more direct and
more transparent approach than giving them lower taxes, because then you'd
know exactly how much of the taxpayer's money is going into aiding an industry
and there would be bigger pressure to end that subsidy eventually.

~~~
cpursley
Easy answer - it removes divisive politics from the equation. No more "the
rich don't pay their fair share" from the _left_ and "what's mine is mine"
from the _right_. Both of those are powerful tactics that the bureaucrats
employ to keep us bickering while them and their cronies rob us blind.

~~~
cpursley
By the way, a number of countries have a flat income tax:

[https://en.wikipedia.org/wiki/Flat_tax#Countries_that_have_f...](https://en.wikipedia.org/wiki/Flat_tax#Countries_that_have_flat_tax_systems)

~~~
cpursley
It's interesting to get down votes for sharing link to wikipedia. Is taking a
look at functioning flat-tax systems of other governments not even worth
investigating, or does the very idea simply clash with some folks political
agendas? Several of the nations are able to provide for both social welfare
(including free secondary education and basic healthcare) as well as national
defense on a (typically low) flat tax. Russia's 13% stands out for a large
country and Estonia's 21% for a small country.

