As perhaps would be expected, taxes were not much a part of our nation’s early history. Then the high cost of the War of 1812 brought about a need for revenue at the federal level and the nation’s first sales taxes were implemented. Fifty years later, Abraham Lincoln enacted emergency measures to pay for Civil War. In 1954, the 875-page Internal Revenue Code of 1954 was formulated. It was perhaps the most monumental overhaul of the federal income tax system to date. In 1969, the Tax Reform Act contained major amendments to the 1954 Tax Code.
Reagan-Bush Era
Ronald Reagan ran for president on a platform of tax reform. In 1981 shortly after his election, Congress cut approximately $750 billion over six years in taxes, thus enacting the largest tax cut in U.S. history. This reduction in taxes was partially offset by tax acts in 1982 and 1984 that attempted to raise approximately $265 billion.
In the fall of 1986, President Reagan signed into law the Tax Reform Act of 1986, one of the most far-reaching reforms of the U.S. tax system since the income tax was first adopted. It was perhaps the most complex congressional bill ever, requiring over 180 technical corrections.
The top tax rate on individual income was lowered from 50% to 28%, the lowest it had been since 1916. The Tax Reform Act reduced tax brackets from five or two. Tax preferences were eliminated to account for most of the lost revenue. Over a five-year period, the act mandated a $120 billion increase in business taxation and a corresponding decrease in individual taxation.
President Bush signed the Revenue Reconciliation Act of 1990 into law in 1990 which, like its predecessors since 1987, was small in comparison with the 1986 act. However, the Act offered some new substantive provisions and increased taxes on the wealthy.
Clinton Era
In late summer of 1993, President Clinton signed the Revenue Reconciliation Act of 1993 into law. The Revenue Reconciliation Act passed in the Senate by one Vice Presidential vote. The purpose of this legislation was to reduce the federal deficit by approximately $496 billion that would accumulate from 1994 through 1998. In 1996, four bills were passed which made over 700 changes to the Tax Code rules and regulations, including Medical Savings Accounts and SIMPLE plans.
In 1997, Clinton signed the Taxpayer Relief Act which reduced taxes by $152 and implemented more than 800 changes to the Tax Code rules and regulations, including a $500 per child tax credit, capital gains tax reduction, Roth IRAs and tax incentives for education.
It is wise for both individual and business taxpayers located in the Tri-State area to consult with a tax professional to help assess their current tax situation, looking ahead to the future. If you have any question about taxes, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
