Question

Based on the data in Figure 2, which of these statements is true of the U.S. marginal tax rate?

- It increased during the Great Depression.

- It decreased throughout the 1980s.

- It has consistently increased since its creation.

- It has consistently decreased since its creation.

Answer 1

The true statement about U.S. marginal tax rates is that they were very high in the past and decreased after the Kennedy tax cuts, and the rates decreased throughout the 1980s due to tax reforms.

Step-by-step explanation:

Based on the information provided, including Figure 2, the statement that is true of the U.S. marginal tax rate is that it was very high in earlier times, where marginal tax rates could be greater than 90% for high levels of income, and decreased after the Kennedy tax cuts. It is incorrect to claim that the marginal tax rate has consistently increased or decreased since its creation.

The cuts introduced by Kennedy and the legislation of 1981, which eliminated bracket creep by indexing tax brackets to inflation, show that the tax system does not have a consistent trend of increase or decrease. The marginal tax rate has also decreased throughout the 1980s, as reflected by changes such as those in the 1981 legislation.