Here is a quick summary of the history of the income tax in the United States up to the Obama presidency. Please see past blogs on the history of the income tax in the United States for more information.
Taxes were not much a part of our nation’s early history until the high cost of the War of 1812 brought about a need for revenue at the federal level, which resulted in the implementation of the nation’s first sales taxes. Fifty years later, Abraham Lincoln enacted emergency measures to pay for the Civil War.
In 1954, the 875-page Internal Revenue Code of 1954 was formulated. It was perhaps the greatest overhaul of the federal income tax system to date. In 1969, the Tax Reform Act was enacted which contained major amendments to the 1954 Tax Code.
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 billion and implemented more than 800 changes to the Tax Code rules and regulations.
President Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001 which made 441 changes to the Tax Code. It was estimated to be the third-largest tax cut since World War II as it saved taxpayers $1.3 trillion over ten years. Congress enacted extensive tax legislation from 2002 through 2006.
Obama Era
In 2008, six significant tax bills were enacted. These included: the Economic Stimulus Act; Heroes Earnings Assistance and Relief Tax Act; Housing Assistance Tax Act; Emergency Economic Stabilization Act; Worker, Retiree and Employer Recovery Act; and Heartland, Habitat, Harvest and Horticulture Act. The major provisions of these laws included the first-time homebuyers credit, an additional standard deduction for real property taxes, economic stimulus rebates, an extension of expiring deductions, and another temporary adjustment of the alternative minimum tax.
A year later in 2009, Congress provided almost $300 billion in tax relief, including legislation creating the American Opportunity Tax Credit. It also included expansion of the first-time homebuyer credit, child credit, net loss carrybacks for business, energy credits, as well as other higher education credits. The Worker, Homeownership, and Business Assistance Act extended and expanded the homebuyer credit and net loss provisions.
In 2010, Congress in the eleventh hour extended tax breaks that had expired at the end of 2009 for two years through 2011 and extended tax breaks from 2001 and 2003 for two years through 2012. These had been scheduled to expire at the end of 2010.
Also, a payroll tax reduction was enacted for the tax year 2011. Tax provisions related to health care reform, hiring stimulus and small business stimulus were also enacted in 2010.
In 2013, the tax cuts from 2001 and 2003 were permanently extended by Congress for all taxpayers except those with the highest income. New Net Investment Income tax and Medicare Contribution tax became effective in 2013.
In 2014, a new penalty for failure to obtain health insurance and credit to assist with health insurance premiums became effective, while 2015 saw a new penalty for employers who fail to provide health insurance. Also, states were authorized to set up plans to allow tax-favored accounts for disabled persons. All of these are susceptible to changes during the new presidential administration. We shall see . . .
The Future: The Trump Era
How will incoming President Donald Trump’s tax plan affect individual and corporate taxpayers alike? Trump has promised his new tax scheme will help most individual, business and corporate taxpayers save taxes.
Some of Trump’s proposed changes will lower the business tax rate from 35 percent to 15 percent. The current seven individual tax brackets will be reduced to only three. Trump intends to use the current rates for qualified capital gains and dividends for the three new brackets. His new tax plan also intends to eliminate the net investment income tax and the individual and corporate alternative minimum taxes.
Whether you are an individual or business located in the Tri-State area, it is helpful to consult with a tax professional to help assess your current tax situation. If you have any question about taxes, especially now that it is tax filing season, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
