October 21, 2012

Top Marginal Income Tax rates For Select Incomes over Time

The top marginal income taxes used to be a lot higher.   During WWII the top marginal rate in the USA was 94%.   Today the top marginal tax rate is 35%.     However to hit that top 94% rate in 1945 you'd have to make $200,000 taxable income which is equivalent about $2,500,000 in todays dollars.   Only the very rich were paying that kind of tax rate back then.   For most of us taxable income of $25,000 to $250,000 range is more common.  So to get a better comparison of marginal tax rates over the years lets look at the top marginal tax rate at inflation adjusted rates for incomes in that range.

I'm looking at just the taxable income for a married couple.    I got the historical marginal rates from the Tax Foundation,  for recent tax rates I used the tax brackets at moneychip site and I adjusted the figures for inflation with the BLS inflation calculator.

Here's how it looks in graphic :


Here's the data :



$25k $50k $100k $250k
1930 1.50% 1.50% 3% 9%
1940 4% 4% 8% 19%
1945 23% 25% 33% 56%
1950 22% 26% 38% 62%
1960 20% 22% 30% 47%
1970 19% 22% 28% 48%
1980 18% 24% 43% 59%
1990 15% 15% 28% 33%
2000 15% 15% 28% 36%
2010 15% 15% 25% 33%
2012 15% 15% 25% 33%

 As you can see theres less variation in the marginal rate for the lower/middle income groups.   For inflation adjusted income levels of $25,000 or $50,000 the marginal rate has varied from 20-26% in the 40's to 60's down to 15% for the past couple decades.   The higher income group with >$250k of taxable income has seen rates vary a lot more.   In the 50's their marginal rate was 62% and today its down to 33%.   Before WWII the income tax rates were much lower all across the board.

Keep in mind that I am ignoring deductions and exemptions which would of course impact all this as well.  

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