A Brief, Government Greed History Of The U.S. Federal Income Tax

Posted: 11/4/2017

Trigger & Motivation

Just recently, I learnt that there was an incredibly high top federal income tax rate of more than 60% as far back as in the early 1930s (What during the Depression?). I remembered there were other times of extremely high income tax rates since the Depression. Then there was a period where the popular narrative has it that the so called super rich (incomes of over $200,000 in 1969) did not pay any federal income taxes and as a consequence, the alternative minimum tax (AMT) was introduced. And much more ...

Is it possible that even the U.S. had significant periods of expropriatory taxes in its history? This would be truly shocking.

The Beginnings

“The origin of the income tax on individuals is generally cited as the passage of the 16th Amendment, passed by Congress on July 2, 1909, and ratified February 3, 1913; however, its history actually goes back even further. During the Civil War Congress passed the Revenue Act of 1861 which included a tax on personal incomes to help pay war expenses. The tax was repealed ten years later. However, in 1894 Congress enacted a flat rate Federal income tax, which was ruled unconstitutional the following year by the U.S. Supreme Court because it was a direct tax not apportioned according to the population of each state. The 16th amendment, ratified in 1913, removed this objection by allowing the Federal government to tax the income of individuals without regard to the population of each State.” (Source 3)

The U.S. Congress enacted an income tax in October 1913 as part of the Revenue Act of 1913.

A Shocking And Sordid History Of Greedy Politicians

Following table shows major changes to the federal income tax code from 1913 to 2013:

	Lowest		Highest
Income Year	Tax Rate	Bracket	Tax Rate	Bracket	Max No. Of Brackets	Notes
2013	10%	<= $0 - $8,925	39.6%	> $388,350	7	Barack Obama
2012	10%	<= $0 - $8,700	35%	> $388,350	6
2004	10%	<= $0 - $7,150	35%	> $319,100	6
2003	10%	<= $0 - $7,000	35%	> $311,950	6
2002	10%	<= $0 - $10,000	38.6%	> $307,050	6
2001	15%	<= $0 - $22,600	39.1%	> $297,350	5	George W. Bush
2000	15%	<= $0 - $21,925	39.6%	> $288,350	5
1997	15%	<= $0 - $20,600	39.6%	> $271,050	5
1996	15%	<= $0 - $20,050	39.6%	> $263,750	5
1995	15%	<= $0 - $19,500	39.6%	> $256,500	5
1994	15%	<= $0 - $19,000	39.6%	> $250,000	5
1993	15%	<= $0 - $18,450	39.6%	> $250,000	5	William Clinton
1992	15%	<= $0 - $17,900	31%	> $51,900	3
1991	15%	<= $0 - $17,000	31%	> $49,300	3	Confiscatory again! George H. W. Bush
1990	15%	<= $0 - $16,225	28%	> $19,450	2
1989	15%	<= $0 - $15,475	28%	> $18,550	2
1988	15%	<= $0 - $14,875	28%	> $17,800	2	Hurrah! Best of times have finally returned
1987	11%	<= $0 - $1,500	38.5%	> $54,000	5
1986	0%	<= $1,835	50%	> $88,270	16
1985	0%	<= $1,700	50%	> $85,130	16
1984	0%	<= $1,700	50%	> $81,800	16
1983	0%	<= $1,700	50%	> $55,300	16
1982	0%	<= $1,700	50%	> $41,500	14	Ronald Reagan
1979	0%	<= $1,700	70%	> $108,300	17	Single taxpayer
1978	0%	<= $1,600	70%	> $182,200	34
1977	0%	<= $1,700	70%	> $182,000	34	Jimmy Carter
1965	14%	$0 - $1,000	70%	> $180,000	33
1964	16%	$0 - $1,000	77%	> $200,000	36	John F. Kennedy & Lyndon B. Johnson
1955	22%	$0 - $2,000	91%	> $300,000	26
1954	22%	$0 - $2,000	91%	> $200,000	26
1953	22.2%	$0 - $2,000	92%	> $200,000	26
1952	22.0%	$0 - $2,000	91%	> $200,000	26
1951	20.4%	$0 - $2,000	91%	> $200,000	24
1946	20%	$0 - $2,000	91%	> $200,000	24	Harry Truman
1944	23%	$0 - $2,000	94%	> $200,000	24	World War II. Absolutely insane
1942	19%	$0 - $2,000	88%	> $200,000	24	World War II
1941	10%	$0 - $2,000	81%	> $5,000,000	32	World War II
1936	4%	$0 - $4,000	79%	> $5,000,000	33	Franklin D. Roosevelt
1932	4%	$0 - $4,000	63%	> $1,000,000	55	Herbert Hoover
1925	1.5%	$0 - $4,000	25%	> $100,000	23	Calvin Coolidge & Andrew Mellon
1924	2%	$0 - $4,000	46%	> $500,000	45
1919	4%	$0 - $4,000	73%	> $1,000,000	57
1918	6%	$0 - $4,000	77%	> $1,000,000	56
1917	2%	$0 - $2,000	67%	> $2,000,0000	21	World War I. Woodrow Wilson
1916	2%	$0 - $20,000	15%	> $2,000,0000	16
1913	1%	$0 - $20,000	7%	> $500,000	7

Legend:

1. The data focus on lowest and highest brackets irrespective of the how taxpayers were classified by tax code (e.g. married couple filing joint returns or head of household etc.)
2. Focus is here is on single taxpayer rates after they were first introduced with income year 1971
3. Before income year 1971, focus is on head of household taxes. Head of household was introduced with income year 1952

Some Lessons Learnt

1. The U.S. was for most of the years since 1913 a highly socialist country as supported by the historical data of the U.S. federal income taxes. For the land of the free, this is absolutely shocking. That the American people have put up with this without rebellion is incredible. Where was the tea party long ago?
2. Urgently needed Constitutional Amendments:
1. No tax rate of any major single tax or any combination of major taxes (e.g. sales & income, state and federal etc.) should be allowed to exceed 30%
2. Minor taxes should be prohibited (e.g. so called sin taxes, fuel taxes etc.)
3. There were only two presidents since 1913 who dared and succeeded in reversing this highly socialist taxation regime: Calvin Coolidge & Ronald Reagan. Both presidents were awarded with incredible economic booms
4. The magnificence of the Reagan Revolution becomes even more apparent when looking at the above table
5. A great tax reform would be a flat rate federal income tax of only 10% for every income and tax payer
6. The extraordinary preferential treatment of married couples filing jointly has been outrageous compared to e.g. single taxpayers. The category of married couples filing jointly should have never been introduced in the tax code! When majorities rule, injustice happens!

Sources:

1. https://files.taxfoundation.org/legacy/docs/fed_individual_rate_history_nominal.pdf
2. https://taxfoundation.org/backgrounder-individual-alternative-minimum-tax-amt/
3. https://www.loc.gov/rr/business/hottopic/irs_history.html