A brief history of marginal income tax rates.
Generally, marginal rates were increased and brackets lowered before both world wars. Between the wars, the top marginal rate for the highest bracket was raised sharply twice, but each increase was accompanied by a sharp rise in the top bracket, making it applicable only to the very rich. Tax rates were hiked again before the Korean War. In contrast, rates were lowered substantially during the early 1960s, just before the Vietnam War. These rate cuts, which followed Keynesian fiscal prescriptions, were intended to stimulate the economy by boosting consumer demand.
Since the early 1960s, the trend in marginal tax rates has generally been negative. The rate reductions of the early 1980s were part of a comprehensive fiscal and regulatory effort to create credible, long-lasting work and investment incentives.
Marginal rates were hiked before the Gulf War and again in 1993 to combat runaway federal deficits. More recently, projections of surging federal surpluses partly reversed the early 1990s' rate hikes. The rate reduction schedule enacted in 2001, however, incorporates implementation lags that could induce workers and businesses to postpone productive activity and investment.
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|Article Type:||Brief Article|
|Date:||Jan 1, 2002|
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