In the end, though, everything has a beginning, including the annoying taxes that can eat up so much of our time. You might be surprised to learn just how young sales tax is in our country. After it first got started the idea spread around the country fairly quickly.
Maximum State Income Tax Rates This table is for scholars who need an instrument for the marginal tax rate for a regression study with US data. The actual income tax rate on a taxpayer is endogenous, i. So any regression explaining income or labor supply or charitable giving But variation in state tax laws across states and years is exogenous to individual labor supply and realization decisions.
So an instumental variable that depends only on the state law or, to a lesser extent, on the yearand not on the individual has the potential to be a valid instrument. Sometimes the maximum income tax rate by state and year is a nice independent variable in a cross-state tax-price regression.
Although not representative of typical marginal rates, it is representative of tax rates on property income and it is independent of individual decisions. Of course still higher effective rates may be levied at lower income levels due to clawbacks phaseouts but these are not considered here.
Available here is a list of tax rates by year and state for the maximum state tax.
Note that the top federal rate varies across states because of the deductibility of state income taxes on the federal tax. The taxpayer is assumed to be married and filing jointly. To avoid a simultaneous determination, the federal and state calculation is iterated to a fixed point. Note, in real life each taxing authority allows a deduction only for taxes paid to the other, not tax liability, which avoids any simultaneity.
This deductibility would be the main difference between these rates and the maximum bracket rate which might be published in a summary of state tax laws. The rates shown include the interaction of the regular bracket rates with the phaseout of exemptions and itemized deductions, and many other features of the tax law, but not the minimum tax which by was affecting our synthetic taxpayer if and only if he lived in Oregon or Washington, DC.
Suggestions for treating the AMT are welcome. It will always reduce the marginal rate, but generally not apply to the highest income taxpayers, so it doesn't seem exactly right to include it here.
These are rates for very high income taxpayers rather than the maximum rates which may be very high at moderate income levels in phaseout ranges.
These phaseouts explain why there are so few round numbers in the table. In Januarythe program was rerun to get rates through The old run used by Lerner is available.
The January run introduced some errors in Wisconsin, and was replaced in September with a new run, correcting all known errors and extending the series to An update to is now posted.
In April wage income doubled toand was split between husband and wife, so that states with separate taxation of spouses didn't show a low rate for capital gains.
In future years this will cause some taxpayers to owe minimum tax, but I don't think that has happened yet. Comments and corrections are welcome and should be sent to feenberg nber. In January ofDavid Harris requested the mortgage subsidy rate by state and year for high income taxpayers, and three columns have been added to the tables with that information.
The calculation was extended to the tax year at that time. In April was updated for minor corrections. In April the program was rerun throughwith minor corrections. In February of the program was updated to tax law.
This avoided including any AMT preferences among the deductions. Also, the calculations were extended to In September of the table was recalculated, this time through In August of the table was recalculated, this time through In November the table was recalculated through The Tax Cuts and Jobs Act (TCJA) introduced on January 1st, reduced the United States federal corporate income tax rate to 21 percent from 35 percent.
Still, 44 of the 50 US states levy additional corporate income taxes which brings the average rate to percent. Further, during the Great Depression, marginal tax rates were increased numerous times and by , the top marginal tax rate was 94% on all income more than $,, which in inflation.
The History of Taxes in the U.S. Most of the taxes we pay today have been around for less than half of our country's history.
One of the oldest is the estate tax, Tax Rates, Then and Now. A short history of income tax. There was only one rate of income tax and the highest it reached was 62/3 per cent, during the Crimean War. In the midth century, there were fewer than half-a. After the war, federal income tax rates took on the steam of the roaring s, dropping to 25 percent from through The Depression Congress raised taxes again in during the Great Depression from 25 percent to 63 percent on the top earners.
What prompted Republicans to embrace the modern income tax -- replete with top rates over 90 percent -- as their own? This article is the first in a series exploring the history of federal taxation during the late s and s.