Ronald Reagan ran for president on a platform of tax reform. 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. More than ten years later in 1997, President 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. Following the passage of these major tax bills, significant tax legislation was also enacted during the presidency of George W. Bush. This blog examining the tax history of the U.S. will examine the legislation enacted during his time in office.
Bush II Era
President Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001 which made 441 changes to the Tax Code. It lowered tax rates, repealed the estate tax, and increased contribution limits for 401(k)s and IRAs.
It was estimated to be the third-largest tax cut since World War II as it saved taxpayers $1.3 trillion over ten years. It also created a new lowest tax rate of 10% for the first several thousand dollars of income.
A slow schedule of incremental tax cuts was also enacted to eventually double the child tax credit from $500 to $1,000. The Bush tax cuts adjusted brackets so that middle-income couples owed the same tax as comparable middle-income singles. These changes also cut the top four tax rates (28% to 25%; 31% to 28%; 36% to 33%; and 39.6% to 35%).
The Job Creation and Worker Assistance Act was enacted in 2002 which included a 5-year net operating loss carryback and extends and added depreciation, hoping to provide relief for businesses.
The Jobs and Growth Tax Relief and Reconciliation Act of 2003 accelerated the tax rate cuts that had been enacted in 2001 and temporarily reduced the tax rate on capital gains and dividends to 15%. It also lowered taxes on capital gains and dividends, accelerated marginal tax rate cuts, brought marriage penalty relief, increased child tax credit, and extended bonus depreciation. Other legislation implemented Medicare reform and military tax relief.
In 2004, two bills, the Working Families Tax Relief Act and American Jobs Creation Act, brought the most tax law changes since 1986. The American Jobs Creation Act provided tax relief for ordinary taxpayers and all types of businesses.
Tax bills in 2005 and 2006 extended the favorable rates on capital gains and dividends through 2010. This legislation also raised the exemption levels for the alternative minimum tax, and enacted new tax incentives for retirement. In 2005, Congress enacted the Energy Policy Act of 2005, the Katrina Emergency Tax Relief Act of 2005 and the Gulf Opportunity Zone Act of 2005.
In 2006, Congress enacted a plethora of tax legislation, making more than 500 changes to the Internal Revenue Code. Temporary capital gains and dividend rates of 15% were extended and the AMT exemption was temporarily increased. In 2007, Congress modified the rules on forgiveness of debt to benefit homeowners facing foreclosure or modification of their mortgages.
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.
