Throughout the 1970s, the top marginal rate was at 70% but inflation eroded the real value of income thresholds due to the lack of indexation for inflation. This phenomenon is known as “bracket creep” Congress enacted minor reforms, but there was no major reduction in the top marginal rate that occurred during that decade. The Tax Reform Act of 1976 adjusted deductions while the top marginal tax rate remained at 70%.
Significance:
- High inflation pushed wages up and introduced the concept of Bracket Creep pushing people into higher Marginal Tax Brackets
- While the Top Marginal Tax Rate was lower than its World War II peaks, it was still a significant 70%
- The 70’s saw a proliferation of uses of Tax Shelters by Wealthy and Corporations
- The Tax Reform Act of 1976 sought to close Tax Loopholes, and expand the Alternative Minimum Tax (AMT)
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