A brief history of the federal income tax

The y-axis shows number of tax returns filed divided by number of households.

In 1913, 358,000 returns were filed which was 2% of all households. While the top tax rate was 7% on incomes above $500,000 ($10.9 million in 2010 dollars), the first $3,000 ($65,331 in 2010 dollars) was exempt from the the income tax for single persons.

In 1918, 4,425,000 returns were filed which was 20% of households. Now the exemption was $1,000 ($14,352 in 2010 dollars) while the top rate of 77% was now applied on income over $1,000,000 to pay for World War I ($14.3 million in 2010 dollars). There was high inflation during and right after the war so by the peak in 1923 almost 40% of households were being taxed due to bracket creep. This was fixed in 1925.

In 1942, 36,619,000 returns were filed and the exemption had been dropped to $500 for single persons ($6,613 in 2010 dollars). For the first time the number of income tax returns filed exceeded the number of households.

And the last 70 years the data are self-evident.  These data are potentially relevant re the currently ongoing discussion re raising tax rates on America's wealthiest people.

Graph and text from Visualizing Economics, via Yglesias.