The Revenue Act of 1936, (June 22, 1936), established an "undistributed profits tax" on corporations in the United States .
It was signed into law by President Franklin D. Roosevelt.
The act was applicable to incomes for 1936 and thereafter. Roosevelt sought additional permanent revenue of $620,000,000 and temporary revenue of $517,000,000. To secure the permanent revenue he suggested the substitution of a tax on undistributed earnings of corporations. Individual rates were raised only on the very rich (that is, income over $5 million a year.). Roy G. Blakey, and Gladys C. Blakey. "The Revenue Act of 1936." American Economic Review (1936): 466-482 online. See also
Revenue Act of 1935, which raised taxes on high incomes
Tax on corporations Normal tax
A Normal Tax was levied on the net income of corporations as shown in the following table.
Revenue Act of 1936Tax on Corporations Facsimile from Statutes at Large Net Income(dollars) Rate(percent) 0 8 2,000 11 15,000 13 40,000 15
Surtax on undistributed profits
A Surtax was levied on corporations on "undistributed profits", i.e. profits not paid out in dividends, as shown in the following table.
Revenue Act of 1936Surtax on Undistributed Profits Application(percent ofundistributed net income) Surtax Rate(percent) up to 10 7 from 10 to 20 12 from 20 to 40 17 from 40 to 60 22 over 60 27
Tax on individuals
A normal tax and a surtax were levied against the net income of individuals as shown in the following table.
Revenue Act of 1936Normal Tax and Surtax on Individuals Net Income(dollars) Normal Rate(percent) Surtax Rate(percent) Combined Rate(percent) 0 4 0 4 4,000 4 4 8 6,000 4 5 9 8,000 4 6 10 10,000 4 7 11 12,000 4 8 12 14,000 4 9 13 16,000 4 11 15 18,000 4 13 17 20,000 4 15 19 22,000 4 17 21 26,000 4 19 23 32,000 4 21 25 38,000 4 24 28 44,000 4 27 31 50,000 4 31 35 56,000 4 35 39 58,000 4 35 39 62,000 4 39 43 68,000 4 43 47 74,000 4 47 51 80,000 4 51 55 90,000 4 55 59 100,000 4 58 62 150,000 4 60 64 200,000 4 62 66 250,000 4 64 68 300,000 4 66 70 400,000 4 68 72 500,000 4 70 74 750,000 4 72 76 1,000,000 4 73 77 2,000,000 4 74 78 5,000,000 4 75 79
Exemption of $1,000 for single filers and $2,500 for married couples and heads of family. A $400 exemption for each dependent under 18.
See also Revenue Act of 1935, which raised taxes on high incomes References
Further reading Paul, Randolph E. "The Background of the Revenue Act of 1937." U. Chicago Law Review . 5 (1937): 41+ online