History of Federal Income Tax Rates: 1913 – 2024 (2024)

FAQs

What was the federal income tax rate in 1913? ›

The first income tax rates were introduced in 1913, when the modern income tax system was first established. The rates ranged from 1% to 7%, depending on the amount of income earned. These rates remained unchanged until 1918, when they were increased to help fund the costs of World War I.

The top income tax rate reached above 90% from 1944 through 1963, peaking in 1944, when top taxpayers paid an income tax rate of 94% on their taxable income. Starting in 1964, a period of income tax rate decline began, ending in 1987.

The ratification of the Sixteenth Amendment in 1913 gave Congress the right to levy and collect income taxes. Income taxes tend to be progressive because they tax a larger percentage of income from high-income groups than from low-income groups.

The only data for the period Nbrch to December 1913 show that there were fewer than 400,000 tax returns filed which met the $3,000 minimum income filing requirement. The income tax for 1913 amounted to about $28 million.

“The 16th Amendment in 1913 permitting an income tax was not a 'temporary' change,” Graetz told USA TODAY in an email. “Constitutional power to lay and collect income tax from whatever source derived is not temporary, but rather built into the federal system permanently,” Brown said.

The 16th Amendment to the United States Constitution was ratified in 1913 and granted Congress the power to collect income taxes on individuals and corporations. Before its adoption, the federal government collected most of its revenue from tariffs and excise taxes, which were largely seen as unfair.

1862 - President Lincoln signed into law a revenue-raising measure to help pay for Civil War expenses. The measure created a Commissioner of Internal Revenue and the nation's first income tax.

Although most Americans believe the middle class bears the heaviest tax burden, it's actually the top 1% who pay the highest federal tax rate, at 25.9%, the Tax Foundation analysis found. But the average tax rate paid by the top 1% has declined in recent decades, according to the Tax Foundation analysis.

Before an income tax was established, the majority of funds given to the federal government derived from tariffs on domestic and international goods.

Underwood-Simmons Tariff Act, U.S. legislation enacted in October 1913 that lowered average tariff rates from about 40 percent to about 27 percent and reintroduced a federal income tax. The legislation, which fulfilled a key plank in Woodrow Wilson's 1912 presidential campaign, is named after Alabama Rep. Oscar W.

Who collected taxes before the IRS? ›

After the Revolutionary War, the Constitution gave Congress the power to impose taxes and other levies on the general public. States were responsible for collecting and passing them on to the federal government.

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.

In 1944, the top rate peaked at 94 percent on taxable income over $200,000 ($2.5 million in today's dollars3). That's a high tax rate.

At first, the income tax was incrementally expanded by the Congress of the United States, and then inflation automatically raised most persons into tax brackets formerly reserved for the wealthy until income tax brackets were adjusted for inflation.

CNBC's Robert Frank reports on Elon Musk's tax bill which is the largest in history. Musk will pay a total of $12 billion for 2021. Frank joins 'Squawk on the Street' to discuss the details.

1862 - President Lincoln signed into law a revenue-raising measure to help pay for Civil War expenses. The measure created a Commissioner of Internal Revenue and the nation's first income tax. It levied a 3 percent tax on incomes between $600 and $10,000 and a 5 percent tax on incomes of more than $10,000.

The act was applicable to incomes for 1918. For 1919 and 1920 the top normal tax rate was reduced from 12 percent to 8%. This reduced the top marginal tax rate that combined normal tax and surtax from 77% to 73%.

As a share of GDP, individual income taxes amounted to 1.1 percent of GDP in both 1929 and 1930, when tax rates were 1.1 percent to 25 percent, but then fell to an average of 0.7 percent of GDP from 1932 to 1935, when tax rates were 4 percent to 63 percent.

That despite a statutory top marginal income tax rate of 91% in that era, the rich actually paid a much lower effective tax rate, because they were able to recategorize their income as coming from investments, and thus subject it to a relatively favorable rate.