May 31, 2025
The 60’s began the period of Post War Tax Policy, and the start of a downward trend in the Top Marginal Tax Rate. At the start of the 1960s, the top marginal tax rate stood at 91%. This rate applied to the highest incomes and was justified as a tool for redistributive justice and National security financing. However, the Revenue Act of 1964, part of President Lyndon B. Johnson’s implementation of President John F. Kennedy’s economic agenda, reduced the top rate to 70% and started the slow decline of the Top Marginal Tax Rate.
Significance:
- Revenue Act of 1964, also known as the Tax Reduction Act, cut Marginal Tax Rates 20% across the board.
- The Top Marginal Tax Rate dropped from 91% to 70% over a 3 year period from 1963 to 1965
- Top Marginal Tax Rate of 70% for Income over $200,000 ( $2 Million in 2025)
- Lyndon Johnson was able to continue to champion and push through John F Kennedy’s Economic agenda after his assassination.
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May 31, 2025
This period was characterized by massive tax increases and deficits to pay for the immense expenses and resources required for World War II. The Revenue Act of 1940 was a major piece of U.S. tax legislation. The Revenue Act was signed into law by President Franklin D. Roosevelt and it was designed to increase federal revenue in light of growing defense expenditures. The top marginal income tax rate hit 94% in 1944–1945.
Significance:
- Dramatic and massive increase in Tax Revenue and Marginal Tax Rates
- Highest National Debt to GDP ratio to data, dramatically higher than any other period, only rivaled by our current National Debt
- Corporate Marginal Tax Rates increased to 19%, and 33% over $25,000
- The Revenue Act of 1940 base individual Income Rate was 4% with a Surtax added with the top combined Marginal Tax Rate of 79%
- The Top Marginal Tax rates in 1944-1945 hit 94% for Income over $200,000 ($3.6 Million in 2025)
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May 31, 2025
In 1920s, marginal tax rates were significantly reduced, with the top rate falling from wartime highs to 25% by 1925 under policies championed by Treasury Secretary Andrew Mellon. However, as the Great Depression deepened in the 1930s, tax policies shifted under FDR, and marginal tax rates increased. In 1932, Congress raised taxes from 25% to 63% on the top earners. The Tax policies of the 20’s and 30’s were really a Yin and Yang opposite with the Roaring 20’s declining tax rates, and the Depression Era 30’s dramatic tax hikes.
Significance:
- Post War tax rates were reduced significantly, but not back to Pre War levels (Pre War 7%, Post War 25%)
- Rates sharply increased again to 63% for Top Earners at the advent of the Great Depression
- Treasury Secretary Andrew Mellon favored reduced tax rates in order to stimulate economy.
- Rates declined throughout the 1920’s
- Revenue Act of 1921: Reduced the top marginal rate from 73% to 58% for 1922-1923.
- Revenue Act of 1924: Further reduced the top marginal rate to 46%.
- Revenue Act of 1926: This was the most significant cut of the decade, lowering the top marginal rate to just 25% on incomes over $100,000. This rate remained in effect for the rest of the decade.
- Revenue Act of 1928: Maintained the top rate at 25%.
- Rates increased dramatically in the 1930’s
- Revenue Act of 1932: Raised the top marginal income tax rate from 25% to 63% on incomes over $1 million. This was the largest peacetime tax increase in U.S. history at the time.
- Revenue Act of 1935 (The “Wealth Tax” or “Soak the Rich” Act): It increased the top marginal income tax rate to 79% on annual incomes over $5 million.
- Revenue Act of 1937: Closed loopholes and increase Revenue generation efficacy
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May 30, 2025
During World War I, Congress passed the 1916 Revenue Act, and then the War Revenue Act of 1917. The top marginal income tax rate jumped dramatically from 15% in 1916 to 67% in 1917 to 77% in 1918.
Significance:
- Significant increase in Income Tax rates in order to fund the war.
- Massive expansion in the Federal Governments taxation power
- Rates continued to escalate during the War
- Revenue went from $ in 1917 to $3.6 Billion in 1918.
- Increased the Governments knowledge of private financial affairs
- Paved way for Modern tax system, replacing Tariffs and Excise with Income as the top source of revenue
- Introduction of Corporate Excess Profit tax
- Marginal Tax Rates increased, limits were lowered, exemptions reduced, and Progressive nature all increased dramatically
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Somewhat counter intuitively, the income tax at the beginning was generally well received. It was championed by Democrats with only one Republican voting for the 1913 Revenue act. However, it was supported by Populists and Progressives including William Jennings Bryan and later Theodore Roosevelt. It was seen by the vast majority of Americans as a Fairness issue with the wealthy paying their fair share.
Significance:
- Less than 1% of population actually paid any income taxes
- For vast majority of Americans it had no impact
- Shift from regressive taxation on tariffs and excises
- Seen as a Progressive tax mainly on the wealthy
- Marginal Tax Rate 1% over $3,000 ($97,000 in 2025), and $4,000 ($129,000 in 2025) for married couples. The top marginal tax rate was 7% for incomes above $500,000 ($16.15M in 2025 dollars)
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