Tax Rates Might Start Low, But Rarely Stay That Way

The highest marginal income tax rate in 1913 was only 7% (IRS data here), but it only took Congress five years to raise the highest rate to 77% in 1918, and eventually to rates above 90% in the 1940s and 1950s (see chart).

As I wrote today on the Enterprise Blog:

As we now consider imposing a European-style value-added tax (VAT) on Americans, we should remember the lesson of U.S. income tax rates—they started low but then rose quickly as income taxes became an attractive source of new revenue for spending-hungry politicians. As today’s Wall Street Journal editorial points out, the lesson from Europe’s record of VATs is very clear: the rates might start low initially, but “they rarely stay that way.”