Think taxes are high today? Imagine having to pay more than half of your earnings — 63 percent — to the government. That was the highest tax rate, for individuals earning one million dollars or more, enacted as a result of a billion-dollar federal budget deficit after the social security spending during the Great Depression. Congress first considered a sales tax, but after an outpouring of popular condemnation, decided to instead go with an income tax, putting the burden of payments squarely on the highest earners.
On this day, June 6, in 1932 Congress approved the Revenue Act of 1932, overnight raising the top personal income tax rate from 25 to 63, and corporate and estate taxes by 15 percent. The surtax rate was estimated to bring in an addition $88 million dollars the following year, badly needed to stabilize the country’s debt.
The House version of the bill also included a provision for a one-cent tax on imported fuel. An amendment widened it to a tax on all fuel, including gasoline, payable at the pump. It was buried amidst excise taxes on many other materials and products, including coal, jewelry, postal stamps and weapons, and passed without a vote. Thus the first federal tax on gasoline was established.