Today's taxes aren't too bad
Sunday, June 27, 2010
Really. when compared to where tax rates have been over the years, we're in pretty good shape.
Don't believe me? Check out this graphic from Mint.com.
Click on the image (or here) for a larger view.
Depending on your browser, you might have to re-click the image
once it opens as a pop-up to get maximum magnification.
Coming down since 1976: When I was in college, the top tax rate was 70 percent.
That tax rate applied to married couples with taxable earnings of more than $200,000; to single and married filing separately taxpayers with income exceeding $100,000; and head-of-household filers making more than $180,000.In addition to that higher rate, there were many more rates; try up to a possible 33 percentages that could be applied by the IRS to income. OK, that was for heads of households, but the other three filing statuses had 25 potential tax rates.
And instead of the 10 percent lowest tax rate we have now, all those years ago the IRS's cut was at least 14 percent.
Tax changes, past and future: In the 1980s, tax things began to change, culminating with the historic tax act of 1986.
I was in D.C. when this law passed and yes, I thought for the longest time that "historic" was part of the new law's official title.
Joking aside, it was pretty dramatic.
As the tax code changes were phased in, the top tax brackets dropped from 50 percent to 28 percent, although there was a a 5 percent rate surcharge for high-income earners.
To accommodate those lower rates, though, other tax benefits had to be sacrificed:
- The preferable tax treatment of capital gains was eliminated for tax years 1988 through 1990. All
asset sale profits were taxed at ordinary income rates regardless of how long the property had been held.
- Medical deductions were limited to only those in excess of 7.5 percent of adjusted gross income.
- The 2 percent threshold was placed on miscellaneous deductions.
- State and local sales tax deductibility was repealed.
- Also stricken from the tax code was the deductibility of nonmortgage consumer interest, such as interest on credit card accounts and car loans.
As you can see, some of the tax breaks that were taken away have been reinstated over the years.
Yet, as the graphic reveals, our income tax rates are still historically low.
As the Bush era tax cuts near expiration at the end of 2010, the taxes are going to get a lot of attention. And worries about the federal deficit is going to affect where our taxes go next.
Dubya and now Obama each appointed panels to look at our tax system and come up with reform suggestions. Neither effort has met with much enthusiasm and even less success.
But the tax clock's ticking. Now's the time to think about what you pay Uncle Sam, what you're willing to keep paying and what tax breaks you'd give up to keep your basic tax rate low.
To give you an idea of how U.S. income taxes have changed since the code as we know it was created in 1913, check out the Tax Foundation's Federal Individual Income Tax Rates History.
For you investors, Citizens for Tax Justice tracks the history of capital gains rates.
And just in case you care, the income tax rates document also will provide you clues to figure out exactly when I attended Texas Tech. Did I mention I was a prodigy who went to college at a very young age!?
- The ever-growing tax code
- Low inflation = little change in tax tables
- What your tax rates might look like
- Federal tax law changes (PowerPoint from
Practical effects of tax law changes)
- Obama's fiscal 2011 tax proposals
- Is it time to kill the mortgage interest deduction?
- Tax reform panel report delayed
- Tax overhaul over and out ... for now
- Is it time for tax reform?
- Lawmaker who helped craft tax cuts is hired
to lobby for their continuation
- Democrats, Republicans and taxes
- A look back at the decade in taxes
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