A Brief History of the Top Tax Rate

Research Report

A Brief History of the Top Tax Rate

November 25, 2002

Abstract

When the income tax was first introduced in 1913, it boasted a top rate of a mere 7 percent on those earning above $500,000 (close to $9 million in 2002 dollars). For the nation's wealthiest taxpayers, this was as good as it was ever going to get - this state of affairs lasted just three years. The nation's entrance into World War I prompted an explosion in the top rate to 67 percent by 1917, or a 950 percent increase in a two year span (the threshold for the top rate jumped fourfold to $2 million). The top rate would remain around 70 percent until 1925, when it fell to 25 percent.

Research Area: 
To reuse content from Urban Institute, visit copyright.com, search for the publications, choose from a list of licenses, and complete the transaction.