A Foolish Take: The Modern History of U.S. Corporate Income Taxes

MarketsMotley Fool

The tax bill passed by the House and Senate this month and signed into law by the president marks a major victory for corporations in the United States.

The bill cuts the top corporate income tax rate from 35% down to 21%. That isn't what Donald Trump vowed during his campaign for the presidential election last year, when he promised to drop the rate to 15%, but it nevertheless represents an historic shift.

Continue Reading Below

The new rate is the lowest it has been since the Great Depression, when corporate taxes were raised to fund Franklin Delano Roosevelt's New Deal.

Going into the Great Depression, which served as the impetus for the New Deal, corporations faced top rates of 10% to 14%. That climbed to 19% by 1938, and up to 40% in the 1940s, to help pay for World War II.

For about a decade thereafter, from 1952 until 1963, the top rate for corporations plateaued at 52%. After a minor respite, when it declined in the mid-1960s, it peaked in 1968 and 1969 at 53% as a result of a surcharge placed on corporate income taxes to help finance the Vietnam War.

The top corporate tax rate has been on a downward trajectory ever since. It was slashed during President Ronald Reagan's administration from 46% down to 34%, before settling at 35% for the past quarter century.

The net result is that corporations now face the lowest top marginal tax rate since the 1930s.

Offer from The Motley Fool: The 10 best stocks to buy nowMotley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. In fact, the newsletter they run, Motley Fool Stock Advisor, has tripled the S&P 500!*

Tom and David just revealed their ten top stock picks for investors to buy right now.

Click here to get access to the full list!

*Stock Advisor returns as of Dec. 4, 2017.

The Motley Fool has a disclosure policy.