The chart above shows the highest marginal individual income tax rates from 1925 to 1945, using data from the IRS. The highest income tax rate was increased from 25% in the early 1930s, to 63% in 1932, and then to 79% in 1936. If you want to turn a recession into a depression with perverse fiscal policy, there's probably no better, more effective way to accomplish that outcome than by more than tripling marginal tax rates from 25% to 79% in the face of an economic slowdown. Talk about an "economic buzzkill"....
Perhaps the new administration and Congress should seriously reconsider whether 2009 would really be a good time to raise taxes. If you want to turn an economic slowdown into a recession, or an average recession into a severe recession, or a severe recession into a depression, raising taxes would surely help make that happen. It surely helped turned the recession of 1929-1933 into the Great Depression.
The chart above shows the increases in the lowest marginal tax bracket between 1929 and 1940, which for all years applied to taxable income between $0 and $4,000. Starting from .375% in 1929, the lowest rate tripled to 1.125% in 1930, and then increased again by more than 3.5 times to 4% in 1932, for a total increase of more than 10 times.
In dollars, the income taxes payable on $4,000 of income increased from $15 to $160 between 1929 and 1932, a 10.667 time increase. In today's dollars that would be like a tax increase of more than $2,315, from $240 in 1929 to $2,555 in 1932, on income in today's dollars of about $64,000 (using the BLS Inflation Calculator here).
The increase in the lowest individual income tax rate from 1.125% in 1931 to 4% in 1932 would be equivalent to a $1,837 annual increase in today's dollars for someone reporting $4,000 of income in 1932 (equivalent to $64,000 today), from $718 in 1931 to $2,555 in 1932, whopping 255% tax increase in just one year! Even for someone reporting taxable income of only $1,000 in 1932 (equivalent to $16,000 today), the increase in tax liability would have been 255% in just one year.