As the Congress gets moving in coming weeks on the first serious effort at tax reform since the mid-1980’s, it is important for the folks back home to remember one thing – while the focus for many Americans will be on the individual tax rates and changes that impact every day taxpayers, this package is likely to be about so much more than just that, as a look back at the big tax bills of the Reagan Administration so easily demonstrates.
“I will tell you, our country needs tax cuts,” the President said in recent days, making the case that tax reform will spur economic growth in the United States.
“We’re fighting for lower taxes, big tax cuts, the biggest tax cuts in the history of our nation. We’re fighting for tax reform, as part of that,” Mr. Trump said.
And so, the voters have a bit of a homework assignment, because tax reform is about a lot more than just cutting the tax rate that Joe Six Pack and his wife pay to Uncle Sam.
The 1980’s were an active time for the House Ways and Means Committee, and the Senate Finance Committee – those are the panels in charge of writing tax measures in the Congress.
During the Reagan Administration, we had three major tax bills become law:
+ The Reagan tax cuts of 1981, the “Economic Recovery Tax Act of 1981.”
+ The next year, there was a major bill to increase taxes, the “Tax Equity and Fiscal Responsibility Act of 1982.”
+ Then, both parties came together for major changes to the Internal Revenue Code with the 1986 Tax Reform Act.
If you look at the 1986 Act, it starts with something that may end up being a prime focus in 2017:
Sec. 101. Rate Reductions
Sec. 102. Increase in standard deduction
But there is so much more that is involved in that 879 page bill, just as there was so much more than individual matters in the 1981 and 1982 tax bills.
The 1986 bill had provisions on capital gains, real estate, business tax credits, investment tax credit, depreciation, energy, agriculture, limits on certain tax shelters, provisions affecting life insurance, pensions, foreign tax provisions, and on, and on, and on.
And there are also a lot of “rifle shot” provisions, which impact just one project or company. We will see in coming weeks if the 2017 version of tax reform involves something similar to these:
Lots of people have told me in recent years of how lawmakers should “read the bill.”
Well, the last three big tax measures from the 1980’s are all linked on this page.
Read the bills.
And start realizing just how complicated this can be on tax reform.