“Why does a ‘slight tax increase’ cost you two hundred dollars, and a ‘substantial tax cut’ save you two dollars?”
Historical Income Tax Rate:
- A detailed overview of income tax rates and tax brackets will show that income tax rates continued to change in the decades that followed.
- The income tax rate for the bottom tax bracket grew, peaking at 22.2% in 1952.
- The lowest tax bracket at that point was comprised of individuals earning up to $4,000. The tax bracket itself peaked in 2001 at $45,200.
- The tax rate for the top tax bracket also continued to grow and peaked at 92% in 1950. The tax bracket at this time was for the induvial making over $400,000.
- The last decade the rate for the bottom tax bracket, individuals earning less than $15,000, is at 10%. The top bracket rate is at 35% for individuals earning around $350,000.
Tax Code History and Tax Law Growth:
- The modern tax code is described as complicated and tax code reform is a common issue among politicians. Example, Ronald Reagan along with Congress reformed the tax code twice during his two terms in office (1981 and 1986).
- Regan’s tax reform provided what was at the time the largest tax cut in the nation’s history. He was not the first or the last to reform the tax code (nearly every recent president before or after his has attempted to reform the tax code in one way or another), Regan’s tax reform was considered historical.
- Bill Clinton lowered taxes for the middle class in the 1990s and in 2001 George W. Bush provided another massive tax cut for all incomes. The reforms reduced taxes but did not drastically simplify the tax code. Which kept the issue of a common topic of conversation amongst politicians. Despite the complicated workings of the income tax, it can provide people with many tax breaks and tax deductions; some of them being quite unusual.
- The modern tax code has grown tremendously over the years. Currently, the tax code contains over 9,000 sections.
- Form 1040 instructions alone speak for the incredible growth of the tax code over its history. 1913 they only took up to 1 page, while nowadays they take up 174 pages!
- The modern tax code is much more broad and complex than that in 1913 and now includes many more categories, like employment taxes, financing of election campaigns, coal industry health benefits and trust fund code.
- The growth can be attributed to both expansions and small changes and revisions that are made to patch loopholes.
- The last 10 years, it is roughly estimated that the tax code has been amended or revised over 4,000 times.
This is the conclusion of the three-part history of taxation. We here at Flat Top Bookkeeping found the history to be interesting, to say the least. As stated in the past, taxation is not going anywhere, with new tax reforms with each Presidential election.