Federal Tax Bracket Chart
July 10th, 2009
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Question: Did the Federal Income tax rate for the highest bracket really go up to 94% during WWII?
I am reading an article in Wikipedia:
http://en.wikipedia.org/wiki/Income_tax_in_the_United_States
It has a chart that says that the highest bracket in 1944 went up to 94%… is this true? I know Wikipedia sometimes has errors… this just doesn’t seem possible! That means that some who made a million dollars (I imagine that would be the in the highest bracket) would have to pay $940,000 in federal taxes… they would be left with $60,000 (and maybe still have to pay state taxes!). In fact, the historical tax bracket for the highest income seems to always been higher than now, at least until the Reagan era (I do have to admit I think he was right in lowering… I don’t care how much you make, anything over 50% is ridiculous!!)… but it does make me wonder why the heck people are complaining so much about taxes now…
Answer: The points made above about the marginal tax rate is very important. Only the portion of income above that bracket minimum would be taxed at the top rate, rather than one’s entire income.
To use a modern example (using 2008 tax tables) a single person with taxable income of $400K would be in the 35% tax bracket. However, only the amount over $357,701 is taxed at 35%. That person’s total tax would be (again using the 2008 tables) $118,597. That comes out to an effective rate of 29.65%.
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