Tax Rates

We were visiting our friends Shari and Barry in Columbus over Thanksgiving. Barry is a professor of Comparitive Studies in the Department of Humanities at Ohio State University. He was working on a lecture for his class and asked an interesting question: "How did the highest tax rate change during Reagan's presidency?"

Alan found the answer at: the Tax Policy Center website. It is fascinating.

The top marginal tax rate in 1915 was 7%. Then during World War I, it was raised to 77%. It then gradually dropped to 25% during the depression, with a jump to 63% in 1932 that steadily increased to 94% by the end of World War II. It stayed at 91% (or thereabouts) until 1964 - almost 20 years. It then dropped to 70% and bounced around in the lower 70s until 1982 (under Reagan) when the rate dropped to 50%. From 1987 to now, it has been bouncing between 28% and 39.6%. Right now it is at 35%.

The legend at the bottom of the table mentions that this simple representation of the tax rate ignores a number of simplifications, the most important of which is the number of returns that are subject to this top tax rate. I couldn't find that percentage anywhere, but I'd love to know it. It also ignores the difference between earned income tax rates and unearned income tax rates (e.g., capital gains.)

When rich people talk about the staggering taxes they pay, remember that it could be (and has been) worse.