PATIENT
The top marginal rate
RATE
91% (92% in 1952–53)
APPLIED TO
Taxable income over about $200,000 (single)
KEY IDEA
Marginal, not average
CHIEF COMPLAINT
Everyone cites the 91 percent rate. What did it mean, and did anyone pay it?
HISTORY OF PRESENT ILLNESS
After World War II and the Korean War the top federal income tax rate stayed at 91 percent for most of the next 18 years, through both of Eisenhower's terms. People cite it on both sides of politics. It was a marginal rate on a very high slice of income, with many ways around it. It fell to 77 percent in 1964 and 70 percent in 1965.
REVIEW OF SYSTEMS
MARGINAL
91 percent applied only to the dollars above the threshold, not to a person's whole income.
EFFECTIVE
Estimates for the top 0.01 percent range from about 31 to 45 percent (income tax only) to over 70 percent (all federal taxes). Never 91.
LOOPHOLES
Capital gains were taxed at a lower maximum, plus deductions, trusts and income shifting.
GROWTH
Disputed. The 1950s are used as evidence that high rates help growth and that they do not hurt it, and also as evidence that they were mostly avoided.
TODAY
The top rate is 37 percent. A 70 percent proposal in 2019 brought the old number back into debate.
PHYSICAL EXAM — STYLE & STRUCTURE
- —The 16th Amendment (1913) is the source of the federal income tax.
- —The top rate was 94 percent in 1944 and 1945, 91 percent most years from 1946 to 1963, 77 percent in 1964 and 70 percent from 1965 to 1981.
- —Eisenhower served two terms with a 91 percent top rate and did not cut it.
- —Cuts came in 1964 (Revenue Act), 1981 (ERTA, to 50 percent) and 1986 (to 28 percent).
ASSESSMENT & PLAN
Read the number as a marginal rate before repeating what it 'meant.' Every claim is tagged Settled, Disputed or Popular myth with a source, and the live arguments (high rates and growth, what the rich actually paid, whether the top rate should be higher now) show both sides at equal length in the full Study Guide.