A Presidents Day Observation — An Interesting Look at Presidents & Taxes

On Monday of this week the nation celebrated National Presidents Day. For those of us that are older and grew up before the 1970s, know U.S. used to celebrate President Washington’s birthday on February 22nd and President Lincoln’s on the 12th of the month.

Washington’s birthday was a national holiday and it was set aside as one by Congress in 1885. Since his birthday is only on a Monday every seven years, Congress decided to declare the birthday of the nation’s first president as a national holiday on the third Monday of the month of February.

That decision was part of the Uniform Monday Holiday act in 1971. It was basically done because federal workers — including those members of Congress — love their three-day weekends.

Congress tossed Lincoln into the mix since his birthday was on the 12th.

Not of that information has anything to do with taxes. However, taxes and presidents are the subject of this story. The last president to push for and get tax reform is former President Donald Trump.

While he didn’t author the bill, he did sign the 2017 Tax Cuts and Jobs Act into law.

Supporters claim it dropped the federal tax burden for 65% of the nation’s households. Weekly Industry News isn’t going to debate that, and besides, Trump is not one of the 10 presidents who’ve impacted the nation’s taxes the most.

As most of you know, early in the history of the nation the federal government did not tax individuals or businesses. Federal taxes on individuals and companies came about in 1913 just before World War I.

At the time, the decision by Congress to initiate a federal income tax wasn’t a very popular decision. As we all know, federal taxes have continued to rise since then, and — rich or poor — they still aren’t very popular.

GoBankingRates.com just released a study of presidents and taxes. It found the five presidents that raised federal taxes the most and five that lowered them the most. Since we just celebrated Presidents Day, we thought you find it interesting to look at the website’s conclusions.

The Five Presidents that Taxed Us the Most

1. Abraham Lincoln. He served one term and a few months from 1861 to 1865. Lincoln put the first federal tax into effect — way before the 1913 permanent decision — via the Revenue Act of 1861. It was enacted by Congress on July 1, 1862 and collected a 3% tax on any income over $800 a year.

That money was used to pay for the Civil War.

By the way, the Revenue Act of 1861 created the Internal Revenue Service (IRS). Congress repealed the Revenue act of 1861 in 1871, but it did not do away with the IRS.

As we all know, it is still in existence today.

2. Woodrow Wilson. He served as president from 1913 to 1921. In 1895 the U.S. Supreme Court shocked no one when it declared a federal income tax as unconstitutional.

Like most politicians, Wilson, and the Congress in power in 1913, ignored the court’s decision and got the 16th Amendment to the U.S. Constitution done. It established a federal income tax.

Legislation passed later authorized the first legal, permanent, income tax. It only affected 3% of the wage earners in the U.S. Anyone earning over $3,000 a year had to pay a 1% federal income tax on every dollar over that amount.

3. Herbert Hoover. President Hoover was in office from 1929 to1933. He’s the president who gets the blame for an economic policy that set off the Great Depression. Depending on who’s talking, it started in 1929 and lasted into the late 1930s, or the early 1940s.

Hoover supported the Revenue Act of 1932 that raised the nation’s top tax rate from 23% to 63%. That’s the top bracket. However, large increases were put into place in every tax bracket.

Corporations were not spared, either. They saw tax rates double from 12% to 24%.

4. Harry Truman. Truman was vice president when President Franklin Roosevelt died in 1945. To fund the Korean War, Truman supported the Revenue Act of 1950. The minimum income tax was hit hard by this act of Congress. Individuals now paid a minimum of 20% of their income to the federal government’s coffers.

Those at the top of the income food chain were now required to turn over 91% of what they earned.

5. George H.W. Bush. This Bush is the “Read my lips: no new taxes” president. Bush served one term from 1989 to 1993. The Omnibus Budget Reconciliation Act of 1990 took the top tax rate from the 28% done under the Reagan administration to 31%.

Not a huge rate hike but it caused the president to have to — not only — eat his words, but to lose reelection to Bill Clinton.

The Presidents that did the Most Tax-Cutting

1. Warren G. Harding. He served from 1921 to 1923 and died in office. His term in office was also packed with scandal. However, scandals or not, before he died, Harding got one of the largest tax cuts in U.S. history into place.

World War I’s debt and the now legal income tax had tax rates at the top levels sitting at 77%. The cuts started by Harding went through the 1920s and put rates down to some of the lowest in history.

All this started with the Revenue Act of 1921. In 1922 it dropped the highest rate down to 58% from 73%. By 1923 the top rate had fallen to 50%.

Harding’s successor, Calvin Coolidge continued to push for lower rates and by 1929 the highest tax rate was 24%.

2. John Kennedy. As we all know, President John Kennedy’s time in office was cut short. He served from 1961 to 1963. Kennedy fought for — and got — a tax rate of 70%. This is a huge drop from the 90% that his Republican predecessor, President Dwight Eisenhower fought his party to keep. 

3. Ronald Reagan. The great communicator served two terms in the Oval Office from 1981 to 1989. Taxes were his main focus for his first term. Reagan’s Economic Recovery Act of 1981 — as we were coming out of a huge recession that President Jimmy Carter was blamed for not being able to control — dropped the top tax rate to 50% from 70%.

In his second term in 1986, Reagan pushed for the Tax Reform Act that dropped the highest rate to 28%.

As a comparison, what became known as Reagan’s tax cuts ending up far better than they were when he took office. As an example, GoBankingRates.com said when Reagan took office the highest tax rate was 33% higher than it is today.

When he left office they were 9% lower than they are now.

4. Bill Clinton. President Clinton supported and signed the Taxpayer Relief Act of 1997. It was a radical — but much-needed — overhaul of the IRS tax code. There were over 800 changes in the act. Most of them benefitted lower-class and middle-class earners.

It saw a major cut the capital gains tax and created the Child Tax Credit, the Roth IRA and the educational savings account. 

5. George W. Bush. Oddly, the father and son presidents are also at odds when it comes to taxes. While George H.W. Bush promised no new taxes, we got them. His son, George W. lowered taxes with a couple of new laws.

Most of the breaks — however — went to the top 1% earners in the U.S. and benefitted the rich more than they poor and middle-class. The top 1% income households average cuts of $50,000 a year each year of his administration.

The Center on Budget and Policy Priorities said the top 1% of households “received average tax cuts of more than $50,000 each year. On average, these households received a total tax cut of over $570,000 over this period.”

Source link: GoBankingRates.comhttp://bit.ly/3IGqYcC

Source link: MSN – http://bit.ly/3kiAEk9

About PIA Western Alliance

The Professional Insurance Agents Western Alliance is a membership organization promoting and enhancing the success of independent agencies seeking to grow, learn and be heard within the industry.


More Industry News