Top Marginal Income, Corporate Tax Rates: 1916-2010 [CHART]

By Catherine Mulbrandon
VisualizingEconomics.com

(Click picture to enlarge)

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

Visualizing Economics is a website by Catherine Mulbrandon dedicated to publishing infographics about economic data. Visualizing Economics has been featured at Slate.com, NPR.org, WashingtonPost.com, The Big Picture, Seeking Alpha and on MSNBC

Find more graphics explaining the U.S. economy at VisualizingEconomics.com

Comments

[graffitijoe]

07:46 AM on 04/19/2011

Too bad these charts don't show sales tax or state income taxes to she where 20% of my money goes being in CA. Combine them with Federal and I'm already paying over 40% not to mention property tax, the "special" gas tax, the energy taxes and the $500 I pay in "road tax.

All together I'm already paying close to 50% to the Government as it is - and the teachers union is trying to help their bought and paid for Governor to raise taxes some more!

[graffitijoe]

07:59 AM on 04/19/2011

Aso like a typical American I'm spending about 30% of my income on my on my morgage - that leaves about 20% for food, transpo, and everything else.

So, who's side am I on in the teacher's union vs the CA taxpayer 2011? Well, I'm not thinking like Jerry Brown - that the teacher's pensions are off the table!

[BowlyJones]

02:27 AM on 04/21/2011

If you don't want to pay for the benefits of living in one of the best places in the world to live, then perhaps you might try Somalia. No taxes, Tea Party heaven!

[zelda777]

11:40 PM on 04/18/2011

Ooooo....Charts and Graphs Hog Heaven.

So, with all these tax cuts that the rich have already gotten...why are all these TP-Cons always crying for more tax cuts? They've already got 'em! And they haven't worked! Taxes did not bring the US economy down in 08, and tax cuts are not going to help the situation any.

This is not rocket science.

[MRITechnologist]

02:44 PM on 04/18/2011

Chart after chart more and more proof. Tax breaks for the wealthy does not create more jobs.

[oilfield]

07:02 PM on 04/18/2011

so taking less from our citizens has to create jobs?

[MRITechnologist]

09:31 PM on 04/18/2011

East is east and West is west and never the twain shall meet. It is quite simple actually. Employers are not looking to create jobs. Just because I get a tax breaks does in no way mean that I will create a position that is not necessary. That makes no sense. Employers only employ the minimum number of people to meet demand. If I get extra it goes to me. Why would anyone create a position because of a windfall?

[Doug Yule]

02:02 PM on 04/18/2011

Everyone should be aware that when the top marginal rate was above 50%, very few people were paying at that rate, and most that should have been were using loopholes to get out of it. They eliminated most of those loopholes when Reagan revised the tax code and lowered rates. These days, a lot more people are paying at the highest marginal rate, so any change would have a much bigger effect on the economy and on people's lives. Also, consider that the people at the very top are mostly paying taxes on dividends and long term capital gains. If you raise income taxes, you still won't touch them, but you'll hurt everyone with high ordinary income and low investment income. These people are mostly small business owners paying income taxes on S Corps.

[oilfield]

07:04 PM on 04/18/2011

i dont think you will get much support on hp....most of the big money makes money on money and pays 15% on it....or you could do like buffet and hold the investment and pay 0.....i say the 15% is better than 0.

[William J Unverferth Sr]

01:42 PM on 04/18/2011

I can under stand the desire to not increase taxes. I really do. Right now though small incremental increases in the rates of the top tiers will help without shocking the recovery (too big of an increase and you will shock the recovery though). In addition obscure loopholes need to be closed both personal and corporate.

I am also leaning towards a graduated corporate tax rate. Since taxes are on net profits, graduate it by market cap, or capitalization for private corp.s and $$ in profit. The flat rate doesn't make any sense for corporations, I would also add a new deduction for domestic job creation (after closing loopholes of course).

Disclosure... this is MHO and I am a conservative independent.

[oilfield]

07:05 PM on 04/18/2011

i am also a conservative independent and think that taxes should be lower on corporations...if you look at the tax reciepts there isnt a huge amount that comes from corporate america....if they lower the tax to 15% or so, corporations would stop taking some of the profits they currently take overseas with shell game accounting.

[LightShadow62]

10:37 PM on 04/17/2011

When I have bills to pay my first thought is always taking more time off so that my paycheck is lower.

It doesn't make sense in personal finance and it doesn't make sense for the nation.

[oilfield]

10:02 PM on 04/17/2011

the result of lowering taxes was still an increase in revenue....15% is low enough where tax consequences doesnt alter behavior.

[MRITechnologist]

02:46 PM on 04/18/2011

Where in history? Reagan raised taxes several times so lets not try and ressurect that fossil.

[krummlaw]

05:12 PM on 04/17/2011

Fact: reducing tax rates does not automatically increase revenues. The first decade of this century was the first--the first--in American history in which the economy didn't grow.

So, let's lower taxes some more. Good thinking, Republicans

[oilfield]

07:08 PM on 04/18/2011

tax receipts 2000 2025.20b 2008 2524b.....that is growth....
2009 2105b
it looks like it grew under the gop....not so much the last 2 years.

[stape45]

10:05 AM on 04/17/2011

We are a nation of debtors, starting with the a government that would rather borrow than collect. The wealthy just can’t stand to spend their own money.

[NHGranite]

09:35 AM on 04/17/2011

Sunday Morning just had a discussion on income taxes. The guy from the Cato Institute cranked out the same old canards that are flat out lies. He tried to make us believe that if we tax rich people, they become less productive and don't create jobs. Taxes make them lazy! He also says it's the middle class that gets all the tax breaks, like mortgage interest deduction and medical expenses. Every homeowner with a mortgage gets that deduction - oh forgot the filthy rich NEVER finance homes, they just buy all of them outright. Medical expenses have to be, what 7.5% of your income? and you have to do a long form to get it? Riiiight.

In my opinion, and this graph seems to confirm it, the more the top is taxed, the more they invest in businesses or make tax-deductible donations. One of the CBS respondents is a multimillionaire who says Cato guy is fullabull. If he gets more money, he banks it and just gets richer.
http://www.cbsnews.com/stories/2011/04/17/sunday/main20054697.shtml?tag=contentBody;featuredPost-PE

[General Public]

06:28 AM on 04/17/2011

Here's a simple idea: eliminate all tax deductions, and treat all forms of income the same, whether interest income or income from a job, while eliminating the cap on the payroll tax, which will now apply to all income. After this reform, which will eliminate almost all of the tax code, taxes are quite simple. You pay taxes based on your tax bracket and your income. Period. That's all. So if your tax bracket is, say, 20%, you'd pay 20% of your income in taxes. If you have kids, if you give money to charity, or anything else like that, good for you, but it won't affect your taxes. No tax deductions, exemptions, tax-deferred investments, offshore tax evasion, or anything would be allowed. Every year you pay your taxes based solely on a single number: your total income that year. If you try to avoid doing it, the IRS goes after you. And the 1040 form from the IRS would be 2 lines. First line: how much money you made. Second line: how much taxes you owe. Done. This is not a flat tax, because the poor would pay a small percentage of income and the wealthy would pay a large percentage of income, and we would actually increase the number of tax brackets, with the lowest tax bracket at $1,000 and the highest at $1,000,000,000. It would be made almost impossible to cheat, at least for the wealthy and corporations, who would all pay their fair share, finally.

[General Public]

06:12 AM on 04/17/2011

Right-wingers claim that cutting taxes increases government revenue. I claim that taxes ARE government revenue, and if you cut them, you are cutting government revenue, because taxes and government revenue are the same thing.

Here is a simple analogy: Pretend you are a person. I know, it's hard, but bear with me, OK? So you are a person. You have some kind of income, maybe from a job or something, and this is your revenue. You also have spending, which is the money you spend. You can't spend more than you make without going into debt. Now suppose you go deep into debt but still have a job and income. What is the way out of debt? Republicans propose that you quit your job and this will somehow increase your income! In this analogy, you are the government, your job is taxes, and your spending is government spending. Isn't it amazing that millions of Americans ACTUALLY BELIEVE that if you cut taxes, this can cut the deficit? The deficit, mind you, is the increase in your debt each year. So let's say you had a $10 trillion debt one year and a $14 trillion debt the next year. Well that would be a $4 trillion deficit, by simple subtraction. So how do you reduce the deficit? Well the deficit equals your expenses minus your income, when your expenses are higher than your income. So you can spend less and try and get a raise. A raise means higher taxes!

[SharedGrowth]

02:19 AM on 04/17/2011

Absent loud public outcry the system will continue to remain captive to the rich campaign contributors who control both parties. This stuff is egregious. See the article on Why is the Tax on Work So Much Higher Than the Tax on Speculation? at http://www.associatedcontent.com/article/7948493/why_is_the_tax_on_work_so_much_higher.html?cat=3

[Apollo7]

01:39 AM on 04/17/2011

Luckily for the top 1% and then the 5% who are seeing such amazing fortunes grow the so-called average citizen doesn't see the disparity compared to their own life. This is truly a work of great art because most Americans think that their favorite celeb is truly wealthy while those who've seen how the top 1% live know that it's a closed loop so to speak.
Six houses, private jet, an army of financial servants, and then the regular servants keep it all going. Plus their is security, access in DC, and the knowledge that most people have their price given the right circumstance. Even major mistakes can be excused as we see just recently.

[Apollo7]

01:20 AM on 04/17/2011

Dear America,

Taxes are for little people!

Love,

The top 1%