The answer to this question is that the increase in personal taxes from 1975-1980 can be attributed to several factors. Firstly, during this period there were a number of tax increases implemented by Congress which included expanding the earned income tax credit, raising payroll taxes and implementing new capital gains rates (Newman 2019). These changes led to an overall uptick in revenue as they made it more difficult for individuals to reduce their taxable income through deductions or other loopholes.
Another reason why taxes rose at a faster rate than incomes is because inflation began to become an issue during this time which eroded the value of people’s salaries (CBPP 2020). This resulted in wages stagnating while prices still continued to climb, causing taxpayers’ net incomes after expenses and taxes to actually decline despite them earning more money on paper.
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