The Willie Sutton* Guide to Taxes: Marginal Rates, 1913-2012

This graph traces the marginal tax rate for five income thresholds.  The background bars show the share of federal revenues derived from the individual income tax.  The pre-1942 income tax relied heavily on high earners (rates on those earning less than $50,000 never rose above 8 percent).  The Revenue Act of 1942 broadened the base, introduced tax-withholding from paychecks, and raised rates across the board–transforming the income tax (in order to pay for World War II) into a major source of federal revenue.  For most of the postwar era, the marginal rate on high earners was in the 70-90 percent range–dropping to less than half that in the 1980s and now sitting at 35 percent.

*Willie Sutton was the Depression-era bank robber who, when asked why he robbed banks, replied: “Because that’s where the money is.” 

This entry was posted in Inequality, taxes. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>