In 1944, the top marginal federal income tax rate reached 94 percent — the highest in American history. It remained above 90 percent through most of the 1950s and into the early 1960s. Today the top rate is 37 percent, applying to income above approximately $600,000 for married couples. The journey from one number to the other is a compressed history of American politics, economics, and the relationship between wealth and government.
The Postwar High-Tax Era
High postwar rates were retained partly from political inertia and partly because the economy was growing rapidly and there was no compelling case for cutting taxes on the wealthy. GDP growth was robust during this period — a fact that rate-cut advocates find inconvenient, and that defenders of high rates cite as evidence that elevated taxes don't impede growth. Economists across the spectrum agree the postwar period was unique enough to make direct lessons about tax policy difficult to draw.
The Kennedy Cut and the Reagan Revolution
The Revenue Act of 1964 cut the top rate from 91% to 70%. The Reagan-era Economic Recovery Tax Act of 1981 cut it to 50%. The Tax Reform Act of 1986 — bipartisan — cut it to 28%, trading lower rates for fewer deductions. Subsequent administrations raised and cut from there: 31% (Bush), 39.6% (Clinton), 35% (Bush), 39.6% (Obama), 37% (Trump/2017 TCJA, where it stands today).
"The history of the top marginal rate is not a history of careful empirical adjustment. It's a history of political coalition-building, where those who pay the highest rates have consistently had resources to advocate for their reduction."
What the Research Shows
The empirical literature is genuinely mixed. There is some evidence that very high marginal rates — above 70–80% — reduce taxable income through avoidance and income-shifting. Evidence that moderate reductions from current levels produce significant growth is weaker. The revenue-maximizing top marginal rate, according to most academic estimates, falls between 50 and 70 percent — significantly above the current 37%. Whether the TCJA's individual provisions are extended, allowed to expire, or renegotiated is one of the central fiscal questions of the current Congress.