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Project Note No. 41
Executive Summary
The top bracket rate of the Federal income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.
is now 91 percent (1957). In total the income tax may take up to 37 percent of an individual’s taxable incomeTaxable income is the amount of income subject to tax, after deductions and exemptions. For both individuals and corporations, taxable income differs from—and is less than—gross income.
(maximum effective rate). Such rates bear little relationship to any principle of equity and have important effects on taxpayers’ incentives and actions. Moreover, they produce relatively little revenue. Indeed, it is often argued that lowering these rates would produce more revenue.
This study has two purposes. The first is to try to determine how significant the effect of changes in tax rates on income reported on high income returns has been as well the manner in which tax rates have affected income reported. The second is to re-examine the case for a substantial reduction of the top bracket rates.
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