Now, to catch us up to where the last post left off in 1928, you must remember the price of things then as compared to now. In 1928, $20,000 was about the same as $245,000 is now. The inflation calculator is at:
www.westegg.com/inflation/infl.cgi
So, a loaf of bread cost 10¢, eggs were 20¢/doz. and milk was about 30¢ a gallon. Go to:
www.thepeoplehistory.com/20sfood.html
My three monetary categories of $5,001, $50,001 and $225,001 which would be very reasonable now were then equivalent to $62,000, $620,000 and $2,800,000. You have to remember that to break even with the income of 1928 you would now have to be making $74,000. If you are not then you have lost ground to inflation.
www.time.com/time/magazine/article/0,9171,738618,00.html
Now, on to the next few decades of tax brackets. The great stock market plunge happened in late 1929 and Republican President, Herbert Hoover, decided that we could come out of it on our own without any help from the government so he and congress didn't change the tax brackets in the first few years of the depression. When Hoover lost to Roosevelt in 1932 those brackets began to move some. In 1932 there were 55 tax brackets and the top earners paid 63% to income tax.
in 1933, things changed:
$5,001 paid 8%
$50,001 paid 31%
$225,001 paid 58%
(This was the first step to getting us out of a debilitating depression)
In 1934, the number of brackets shrank from 55 down to 30 but the top earners still paid 63%. What they did was combine most of the brackets with the one just above it and about half of us paid a percentage point or two more than the previous year.
1934 brackets:
$5,001 paid 9%
$50,001 paid 34%
$225,000 paid 58%
By 1936, the wealthy still weren't creating jobs so the Federal Government started with CCC programs and various other job creating plans. Along with this, Congress decided to punish the wealthy by raising the rate the top earners had to pay.
in 1936:
$5,001 paid 8%
$50,001 paid 45%
$225,000 paid 66%
(the top bracket paid 79% which jumped up from 63%)
In 1940, knowing full well that war was coming, a defense tax was imposed. An additional 10% surtax was levied to help with the war effort.
By 1942, we were in the war on two fronts. We declared war against Japan on December 8, 1941 and against Germany on December 11, 1941. We didn't declare war against the rest of the Axis powers till June 5, 1942. The top wage earner rate in 1942 jumped again from 79% to 88% and that was for anyone making over $200,000. So, what they did was raise the top rates and lower the bracket incomes so that everyone got a hike.
In 1942, these were the rates:
$5,001 paid 26% (this was over triple the '36 rate)
$50,001 paid 72% (almost double the '36 rate)
$225,001 paid 88% (about a 35% increase)
The brackets rose only slightly in 1944 with the top bracket paying 94% income tax. In 1946, the income tax brackets were passed and then reduced by about 5% to help spur the economy. The top bracket was originally 91% but was reduced to 85.5% along with a proportionate reduction in the other brackets. Even higher reductions were made in '47, '48, '49 and '50.
In June of 1950, we entered the U. N. Police Action against North Korea and had lots of war obligations but the tax rate was about as high as it could get. Even the lowest bracket was in excess of 20%. The government started reducing the discount on taxes, which originally brought the tax rates down and now made the rates what they were originally.
In 1954, the government tweaked the tax brackets and they stayed the same for several years.
In 1954:
$5,001 paid 26%
$50,001 paid 75%
$225,001 paid 91%
Remember, this was during the Eisenhower years.
This stayed the same till the revenue act of 1964 was passed. This was a substantial reduction in all brackets.
In 1964:
$5,001 paid 23.5% (a 10% reduction)
$50,001 paid 66% (a 12% reduction)
$225,000 paid 77% (a 15% reduction)
The revenue tax rates of 1964 stayed in effect, except for surtaxes, till 1969 when the Marriage Penalty came into effect. Those surtaxes were 7.5% in '68, 10% in'69 and 2.5% in '70.
Tax rates and tax brackets stayed pretty stable till 1982. That's where we'll pick this up in my next post. Ronald Reagan really brought the tax for the upper crust down . . . all the way to 50%! WOW . . . 50%
I think you are beginning to see where we are going here. The rich and super rich are pissing and moaning about the high tax rates now but most of them have so many reductions and expenses to deduct that they pay about half their rates and lots of them pay nothing. Individuals don't have the business expenses to deduct that small business owners have.
Wait till you see what's coming next!
The conclusion and whole point of this is at:
http://swoopsfromsnowyowl.blogspot.com/2010/09/history-of-federal-income-tax_16.html
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