When the federal income tax was proposed in 1913, the tax rate was just 7 percent. However, by the end of World War I, taxes went sky high from 7 percent to 77 percent in just 4 years. After five years of sky high tax rates, rates were cut almost immediately under the Harding-Coolidge Tax cut and significantly dropped the rates all the way down to 25 percent by the end of 1925. It was the first ever federal experiment with supply-side income tax rate cuts. The data showed a steady decline of government revenue alongside with tax rates being cut, but revenues grew right after subsequent economic expansion. This allowed the people to become more productive and engage to work, thus higher revenues. The data from 1920’s showed an increase of revenue from the taxpayers who make more than $100,000 per year from 30 percent to 62 percent. (Rugy, 2003) …show more content…
It was amidst of President’s Kennedy term when Great Depression and World War II happened. This caused the marginal tax rates to plummet, peaking a record high of 94 percent in 1940s. President Kennedy was known to be a firm believer of pro-growth and supply-side economics. So, he proposed a law that caused a massive tax-reductions to the marginal rates right before he was assassinated. This 1964 tax law cut the marginal tax rate off from 90 percent to 70 percent within a year. It was proven to be effective because the data showed that there’s a steady increase of 2.1 percent for average income tax revenue and 2.6 percent for overall government tax revenue. The economy was growing and gaining more revenue in a very fast rate. (Laffer,