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Changes in income tax rates.

In the U.S., income tax rates over the years have primarily been affected by economic requirements (to stimulate the economy or slow down inflation), social needs (to make a fairer tax system) and partisan politics. Given the frequent changes in the maximum individual rate (shown in the table on page 767), tax planning has always been rather challenging for those trying to decide whether to operate a business as a sole proprietorship, partnership, or S or C corporation. Switching a business from one organization form to another is a costly process. Business owners would certainly be helped by a law requiring maximum individual rates (as well as maximum corporate rates) to remain the same for at least 10 years (except in certain national emergencies).

Income Tax Rates
 Maximum
Year individual rates

1913 7%
1916 15
1917 67
1918 77
1920 65
1921 50
1924 40
1926 25
1934 63
1936 79
1941 81
1942 88
1944 94
1945 91
1951 92
1954 91
1964 77
1970 70
1981 50
1987 38.5
1988 28
1989-1990 33
1991-1992 31
1993-1997 39.6


From Jack R. Fay, CPA, PH.D., Associate Professor of Accounting, Gladys A. Kelce School of Business, Pittsburg, State University, Pittsburg, Kan. (not affiliated with AFAI)
COPYRIGHT 1997 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1997, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Author:Fay, Jack R.
Publication:The Tax Adviser
Article Type:Brief Article
Date:Dec 1, 1997
Words:208
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