10/4/2023 0 Comments The flat taxSince the federal government is always looking to increase its revenue while at the same time making Americans feel better about paying their taxes, it has also climbed aboard the tax-reform bus, most recently in 2005 when President Bush formed the President's Advisory Panel on Federal Tax Reform. There are even organizations dedicated solely to tax reform, such as Americans for Tax Reform, Reform AMT, Citizens for Tax Justice, and Americans for Fair Taxation. As a consequence, cries for tax reform can always be heard from every quarter - and especially around election time. The members of Congress responsible for the tax code would not even disagree. There is no question that the federal tax code is too long, too complex, too intrusive, too confusing, and too inequitable. The Economic Growth and Tax Relief Reconciliation Act of 2001 established the current tax brackets of 10, 15, 25, 28, 33, and 35 percent. Under the Economic Recovery Tax Act of 1981 and the Tax Reform Act of 1986, the top marginal tax rates were lowered to 50 and 28 percent respectively. The top rate remained at 91 percent until 1964. The Internal Revenue Code of 1954 resulted in 24 brackets with rates ranging from 20 to 91 percent. During World War II, the tax rate for those in the highest income bracket reached an astounding 94 percent. In the middle of the Great Depression, the top rate rose to 79 percent. The rates did not fall significantly until 1925. Less than 0.5 percent of the population ended up paying income tax.įrom these humble beginnings, the income tax soon blossomed, thanks to World War I, into a tax with a minimum rate that doubled and a maximum rate that reached 77 percent on income of over $1 million. A series of surcharges of up to 6 percent were applied to higher incomes, with the maximum rate being 7 percent on taxable income over $500,000. Our current income tax system, inaugurated in 1913 with the adoption of the 16th Amendment, began with a 1 percent tax on taxable income above $3,000 ($4,000 for married couples).
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