With the highly publicized upcoming Presidential debates, primaries, and caucuses
occurring this month as well as the nation celebrating Presidents Day honoring both Presidents Washington and Lincoln, let us reflect on some historic Presidential tax facts.
President Lincoln signed into law a measure to help pay for the Civil War. This measure created a Commissioner of Internal Revenue and the nation’s first income tax.
President Taft recommended Congress propose a constitutional amendment that would give the government the power to tax incomes without apportioning the burden among the states in line with population.
President Woodrow Wilson summoned a special session of Congress in April 1913. From this was the creation of the 16th Amendment to the Constitution, which made the income tax a permanent fixture in our tax system. The maximum tax rate was 73% on income over $1,000,000 when he left office.
During Franklin D. Roosevelt’s terms the highest income tax rates rose to 94% on all income over $200,000.
When President Eisenhower was in office, the marginal tax rate on regular income over $400,000 was decreased to 91%. The maximum tax on long-term gains was 25%.
President Johnson’s first year of presidency saw the tax rate decrease below 90% (to 77%) for the first time in twenty years. By the end of his administration, the tax rate decreased to 75.25%; however, the threshold for income to be taxed at this rate was decreased to $200,000.
President Nixon’s administration, in response to concerns taxpayers with income over $200,000 and paying zero tax through various exemptions and deductions, created a new minimum tax.
During President Carter’s administration, the first version of our modern day Alternative Minimum Tax was introduced. This Alternative Minimum Tax was modified in 1982, 1986, as well as in recent years, creating our current AMT system. Unfortunately, the AMT system was not properly indexed for inflation, thus currently impacting many unintended middle income taxpayers.
On Oct 22, 1986, President Reagan signed into law the Tax Reform Act of 1986 – one of the largest tax reforms of the United States tax system since the adoption of the income tax.
During Reagan’s administration the maximum tax rate decreased from 70% to 28%, the lowest it had been since 1916.
President George H. W. Bush, despite his famous campaign phrase “Read my lips: No new taxes,” raised the level of both regular and capital gain tax rates as part of the 1990 budget.
During President Clinton’s administration the maximum capital gains tax was decreased by eight percentage points.
President George W. Bush decreased the regular marginal rate for top earners as well as reduced the highest capital gains tax rate to 15%.
President Obama’s administration raised the top income brackets and maximum ordinary and capital gains rates as well as adding new surtaxes on investments and Medicare wages for high income taxpayers. The Obama administration recently passed the Protecting Americans from Tax Hikes Act, which contained permanent tax relief for working families and small businesses. See our Sassetti Blog for additional discussion on this topic.
As we watch the upcoming political presidential events and we are about to enjoy a piece of President’s Day cake, let us all be reflective of the past and make our own best choice for the future.