The top federal income tax rate has varied dramatically across presidencies

The highest federal income tax rate ever imposed on the wealthiest Americans was 94 percent, set during Franklin D. Roosevelt's presidency in 1944 and held through 1945. This was a wartime measure. The second-highest rate was 91 percent, which remained in effect from 1961 through 1963 under President John F. Kennedy and continued into Lyndon B. Johnson's administration until 1964. Ronald Reagan significantly lowered the top rate to 50 percent in 1982, and then to 28 percent by 1988.

The top rate is not the same as what most people pay. It applies only to income above a certain threshold, and that threshold changes with inflation and policy. A 94 percent top rate in 1944 applied only to income far above what most workers earned. Understanding which president set which rate requires knowing both the rate itself and the year it took effect, because Congress writes the tax code, not the president — though presidents propose budgets and sign or veto legislation.

Key Takeaways

  • The highest top federal income tax rate in U.S. history was 94 percent, imposed during Franklin D. Roosevelt's presidency in 1944 as a wartime revenue measure.
  • The second-highest rate was 91 percent, which remained the top rate from 1961 through 1963 under Kennedy and Johnson.
  • Ronald Reagan's administration lowered the top rate from 50 percent to 28 percent between 1982 and 1988.
  • The top marginal rate applies only to income above a specific threshold, so the rate itself does not tell you what percentage any individual actually paid.

Tax rates during wartime and the Great Depression

The federal income tax itself was new in 1913. During the 1920s, the top rate was 73 percent under President Warren G. Harding and then fell to 24 percent by the end of the decade. When the Great Depression began, President Herbert Hoover raised the top rate to 63 percent in 1932. Franklin D. Roosevelt took office in 1933 and raised it further to 79 percent in 1936.

The rate climbed steeply during World War II. By 1944, it reached 94 percent and stayed there through 1945. After the war ended, the rate fell to 91 percent in 1946 and remained at that level for the next 15 years. This 91 percent rate was the top rate when Dwight D. Eisenhower was president (1953–1961) and when Kennedy took office in 1961.

The Kennedy and Johnson years at 91 percent

President John F. Kennedy did not change the top rate when he took office in 1961. The rate remained 91 percent. Kennedy proposed a tax cut in 1963, but he was assassinated before Congress voted on it. President Lyndon B. Johnson signed the tax cut into law in 1964, and the top rate fell to 70 percent that year.

The 91 percent rate is often cited as the rate during the Kennedy administration, but it was also the rate throughout Eisenhower's presidency and the first three years of Johnson's. The rate did not change because of any single president's action — it was the inherited rate from the post-World War II period.

The shift downward from 1964 through 1980

After the 1964 tax cut, the top rate was 70 percent. It remained at 70 percent through the rest of Johnson's presidency and through Richard Nixon's administration (1969–1974). Gerald Ford did not change it. When Jimmy Carter took office in 1977, the top rate was still 70 percent, and it stayed there through his presidency.

The 70 percent rate lasted from 1964 to 1980 — the longest stretch at any single top rate in the modern era. During this period, inflation was high, and the effective tax burden on middle-income earners rose even though their tax rates did not change, because inflation pushed them into higher tax brackets.

Ronald Reagan's reduction to 50 percent and then 28 percent

Ronald Reagan took office in 1981 and made lowering tax rates a central policy goal. The Economic Recovery Tax Act of 1981 reduced the top rate from 70 percent to 50 percent, effective in 1982. This was the first major reduction in decades. In 1986, the Tax Reform Act of 1986 lowered the top rate further, to 28 percent, effective in 1988.

The 1986 reform also broadened the tax base — it eliminated many deductions and credits that had allowed high-income earners to reduce their taxable income. The result was a lower rate but fewer ways to avoid paying it. The 28 percent rate was the lowest top rate since the 1920s.

Tax rates after 1988

The top rate rose to 31 percent in 1991 under President George H. W. Bush, then to 39.6 percent in 1993 under President Bill Clinton. It fell back to 35 percent in 2003 under President George W. Bush and remained at 35 percent through 2012. In 2013, under President Barack Obama, the top rate rose to 37 percent, where it has remained through subsequent administrations.

The current top rate of 37 percent is higher than the 28 percent rate of the 1980s but far lower than the 70 percent rate of the 1960s and 1970s, and vastly lower than the 91 percent and 94 percent rates of earlier decades.

Why the rate changed so much over time

Tax rates reflect both the revenue needs of the government and the political philosophy of the moment. Wartime rates were high because the government needed to fund military spending. The 91 percent rate of the 1950s and early 1960s was accepted as normal, even though it seems extreme by modern standards. The shift toward lower rates beginning in 1981 reflected a different view about the relationship between tax rates and economic growth.

It is important to remember that the top marginal rate — the rate on the highest dollar of income — is not the same as the average rate someone actually pays. A person with a top marginal rate of 94 percent does not pay 94 percent on all their income, only on the portion above the threshold for that bracket. The effective tax rate (total tax divided by total income) is always lower than the marginal rate.

Frequently Asked Questions

Did people actually pay 94 percent in taxes during World War II?

No. The 94 percent rate applied only to income above a very high threshold. A person earning $1 million would not pay 94 percent on all of it — only on the portion above that threshold. Additionally, deductions and credits reduced taxable income. The effective rate (what people actually paid as a percentage of total income) was much lower than the marginal rate.

Why did Reagan lower the top rate so much?

Reagan and his advisors believed that lower tax rates would encourage investment and economic growth, and that the resulting economic expansion would generate enough additional tax revenue to offset the rate cuts. This theory, called supply-side economics, was central to his economic policy. Congress agreed and passed the legislation, though the actual revenue effects remain debated among economists.

Is the current top rate of 37 percent the lowest it has ever been?

No. The top rate was 28 percent from 1988 to 1990, which is lower than the current 37 percent. The rate was also lower in the 1920s, when it fell to 24 percent. The 37 percent rate is lower than most of the post-World War II period but higher than the Reagan-era rates.

Does the president decide the tax rate?

Congress writes the tax code and sets tax rates. The president proposes a budget and can sign or veto legislation, but the House and Senate must vote to change the law. Every rate change mentioned here required congressional action, though the president's position and political party influence whether Congress votes to raise or lower rates.