Question About Top Tax Rates History

December 12, 2008

A reader writes in with a research question:

I am trying to remember who said something in the original debates about federal income tax that it could never rise above a nominal percentage rate because the American people wouldn’t have it… any idea?

Some background: The U.S. income tax first appeared as a wartime measure during the Civil War, and was levied at 3% of income over $800 from 1861 to 1872. It reappeared in 1894 at 2% of income over $4,000, but was struck down as unconstitutional (for not being apportioned by population) in 1895. The Sixteenth Amendment, which removed the apportionment requirement, was ratified in 1913 and the tax became effective with a top rate of 6%. (Today’s top rate is 35%, and it once reached 94%.)

My response:

Hmm I haven’t heard that quotation before. I looked up a bit and found these tidbits:

Senator Robert La Follette of Wisconsin, proposed rates as high as 11 percent to reach what he called the “menace” of “great accumulation of wealth.” (Benton McMillan, Saturday Evening Post 1913):

There has been a progressive income tax in force in Austria since 1898; prior to that time, as far back as 1849, there was an income tax, but the rate, reaching some cases ten per cent, produced discontent and evasions. (Craig Goodrich, 1998):

Opponents of the new tax claimed that soon it might rise from 7% to the horrendous level of ten percent. Outraged supporters of the tax accused them of wild exaggeration and scaremongering.

On April 8, 1895, the Court declared the income tax unconstitutional. To Choate, the income tax was not a slippery slope but the thin edge of a razor. He warned that the 2-percent rate of the 1894 income tax might one day rise to 20 percent.

Those last two sound most like what you’re looking for, but I can’t find (in an admittedly cursory search) any further citations supporting their non-footnoted assertions.

Anyone have any further suggestions about this inquiry?

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