Taxes

Summary

Within each representative's profile is a tab dealing with taxes. When discussing tax policy, seven separate taxes are addressed. Anytime a candidate or representative discusses one of these specific taxes or addresses overall tax policy, it will show up under this tab. These taxes are:

  • the income tax
  • the estate tax
  • the Alternative Minimum Tax (AMT)
  • the capital gains tax
  • excise taxes
  • the property tax (usually for governors only)
  • the sales tax (usually for governors only)

This page briefly explains the five main federal taxes. It describes the laws that affected each tax since 1990 and what changes those laws made. Electronic voting records only go back as far as 1990, so those laws are described here so that when viewing a representative's profile their votes on these laws can be better understood.

Numerous plans have been introduced to change the tax code. The most popular of these are the fair tax and the flat tax. The "Flat Tax" would apply the same tax rate to all incomes and eliminate the exemptions for wealthy Americans. The "Fair Tax" would end the income tax and institute a national sales tax with exemptions for necessities. These proposals are discussed below and if a representative has co-sponsored such legislation or spoken in support of it, it will appear in their profile.

 

The Income Tax

On February 3, 1913 the 16th amendment was ratified. That amendment granted the federal government the power to levy taxes on income.

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

Income tax rates and brackets have varied wildly since the 1913 enactment of the income tax. When it was first established, there were seven brackets with rates from 1% to 7%. By 1921, there were more than 50 brackets with rates up to 73%. By 1925, there were around 25 brackets with the highest rate at 25%. Throughout the 70's and 80's, there were more than a dozen brackets with rates up to 70%. However, by 1990 there were two brackets of 15% and 28%.

The tax rates from the income tax do not establish the amount that a person pays on their entire income, only the income within that bracket. For example, the 2010 brackets state that someone earning less than $16,750 pays only 10% in taxes and someone earning between $16,750 and less than $68,000 pays 15% in taxes. A person earning $15,000 would pay 10% of taxes on their entire income, and a person earning $20,000 would pay 10% in taxes on $15,000 of their income and 15% on the remaining $5,000. A person earning $1 million a year still pays 10% in taxes on the first $15,000 they earn and will pay increasingly large percentages of money as they earn additional money and move into higher brackets.

The first chart below shows the tax rate for the highest earners since the start of the income tax. This is not the level of overall taxation, but rather the highest tax rate possible no matter how much someone is earning. The second chart shows the distribution of income tax rates since 1990. Not that there were only 2 brackets in 1990 with the highest rate at 28% while by 1993, there were 5 brackets with a rate as high as 39.6%.

 

Omnibus Budget Reconciliation Act of 1990

The Omnibus Budget Reconciliation Act of 1990 amended the Internal Revenue Code to increase the maximum marginal income tax rate to 31 percent for those making more than $82,115. It also extended the 15% tax rate that was set to expire. The tax brackets before and after the enactment of this legislation are shown below.

 

Omnibus Budget Reconciliation Act of 1993 

The Omnibus Budget Reconciliation Act of 1993 amended the Internal Revenue Code to increase the maximum marginal income tax rate to 31 percent for those making more than $82,115. It also extended the 15% tax rate that was set to expire. The tax brackets before and after the enactment of this legislation are shown below.

 

Economic Growth and Tax Relief Reconciliation Act of 2001

Known as the first of the "Bush tax cuts" and referred to by it's abbreviation of EGTRRA, this legislation made significant changes to the income tax rates. The act introduced a 10% bracket on the bottom end and phased in reductions in the higher brackets between 2001 and 2006. Significantly, these provisions were written to expire in 2011. The table below shows the tax decreases for the highest brackets and and how they were phased in from 2001 to 2006.

  28% 31% 36.9% 39.6%
2001 27.5% 30.5% 35.5% 39.1%
2002 and 2003 27.0% 30.0% 35.0% 38.6%
2004 and 2005 26.0% 29.0% 34.0% 37.6%
2006 and thereafter 25.0% 28.0% 33.0% 35.0%

 

Jobs and Growth Tax Relief Reconciliation Act of 2003

Considered to be the second of the "Bush tax cuts," the Jobs and Growth Tax Relief Reconciliation Act of 2003 was also known as JGTRRA. This legislation sped up the pace of the tax cuts established in the EGTRRA. This made the combined changes by the EGTRRA and JGTRRA between 2000 and 2003 as shown below. Again, the EGTRRA initiated the cuts shown below, the JGTRRA just sped up their implementation.

 

Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 extends the 2010 sunset of the EGTRRA and the JGTRRA for another 2 years, allowing the tax rates shown for 2003 to be in effect until 2012.

 

The Estate Tax

The estate tax is sometimes called the inheritance tax or the death tax by those who oppose it. It is a tax on your right to transfer property at your death, and consists of an accounting of everything you own or have certain interests in at the date of death. A fair market value of these items is determined and the total of all of these items is your "Gross Estate." The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.

Once the Gross Estate is established, certain deductions (and in special circumstances, reductions to value) are allowed in arriving at your "Taxable Estate." These deductions may include mortgages and other debts, estate administration expenses, property that passes to surviving spouses and qualified charities. There is also an exemption amount, and any tax is taken on the amount of the taxable estate above that exemption amount.

Coinciding with the estate tax is a Gift Tax which has the effect of preventing the transfer of assets through gifts to circumvent the estate tax. A Generation Skipping Tax is also in place to tax trusts and other items that go into affect at a later date and are not part of the estate transfer upon death. These item are taxed upon the death of the donor. The federal estate tax also offers a credit to offset any state estate tax so that the deceased person's estate is not taxed twice.

The modern estate tax started in 1916 and a summary of the history and relative laws concerning the estate tax, gift tax, and generation skipping tax can be found here. The tax Reform Act of 1976 created a unified estate and gift tax framework that consisted of a “single, graduated rate of tax imposed on both lifetime gifts and testamentary dispositions.” Prior to the act, “it cost substantially more to leave property at death than to give it away during life,” due to the lower tax rate applied to gifts. The Tax Reform Act of 1976 also merged the estate tax exclusion and the lifetime gift tax exclusion into a “single, unified estate and gift tax credit, which may be used to offset gift tax liability during the donor’s lifetime but which, if unused at death, is available to offset the deceased donor’s estate tax liability.”

Taxpayer Relief Act of 1997

The Taxpayer Relief Act of 1997 effectively raised the estate tax filing threshold to $1 million, added a family business deduction for estates in which a business made up at least 50 percent of the total gross estate, and indexed a number of thresholds and limits for inflation. Among these were the annual gift tax exclusion and the lifetime generation-skipping transfer tax exemption, as well as the ceiling on the reduction in value allowed under special rules for valuing real estate used by a farm or business.

 

Economic Growth and Tax Relief Reconciliation Act  of 2001

The Economic Growth and Tax Relief Reconciliation Act  of 2001 provided for sweeping changes to the transfer tax system, the most significant of which was the eventual repeal of the tax. Specifically, the law provided for periodic increases in the exemption amount for decedents who die after December 31, 2001, so that the effective filing threshold will be $3.5 million by 2009. The tax is then repealed for decedents who die in 2010. The act also specified changes in the tax rate schedule, replaced the credit for death taxes paid to States with a deduction, and increased the lifetime gift tax exemption. The chart below shows the effects of the EGTRRA and is reproduced from the previously noted IRS document.

 

Estate Tax Exemptions and Rates

The previously discussed IRS document on the estate tax gives exemption rates and tax rate for the estate tax going back to 1916. That chart is reproduced below.

 

Reach and Effect of the Estate Tax

Defining an adult death as one in which the deceased was at least 20 years of age, the aforementioned IRS document on the estate tax shows the percentage of adult deaths that had assets which fell under the estate tax as reproduced below. For most years, this percentage was less than 2%. The document also shows the percentage of total revenue generated by the federal government that came in through the estate tax. Again, for most years, the estate tax accounted for less than 2% of the overall revenue.

 

 

The Alternative Minimum Tax (AMT)

The Alternative Minimum Tax (AMT) was introduced in it's current form in the Fiscal Responsibility Act of 1982. The AMT is a nearly flat tax on taxable income with a set limit for exemptions. A taxpayer must pay the greater of either the taxes calculated through the normal manner, or as calculated through the AMT. The AMT therefore ensures that no matter how many exemptions a person has, there is a minimum tax they must pay.

The AMT applies to both people and corporations although at separate rates. The tax rate for corporations has remained 20% and the exemption amount has remained $40,000.  The rate for individuals has remained stable, but the level for exemptions has been increased almost yearly to address the fact that the law was not linked to inflation. The chart below shows the AMT tax rates for individuals and the exemption amounts allowed for 1986-2012. (Table taken from wiki site)

 

Omnibus Budget Reconciliation Act of 1990

This Omnibus Budget Reconciliation Act of 1990 increased the Alternative Minimum Tax Rate from 21% to 24%.  

 

Omnibus Budget Reconciliation Act of 1993

The legislation changed the AMT by introducing a low rate of 26% and a high rate of 28%. The high rate went into affect at an income level of $175,000 (as seen in the above chart). The legislation increased exemptions for married filing jointly from $40,000 to $45,000, and increased the exemption amount for single people from $30,000 to $33,750.

 

Economic Growth and Tax Relief Reconciliation Act of 2001 

The EGTRRA increased the exemption limits from $45,000 to $49,900 for married filing jointly, and from $33,750 to $35,750 for single or head of household filers.

 

The Jobs and Growth Tax Relief Reconciliation Act of 2003

The JGTRRA increased the AMT exemption limits from $35,750 to $40,250 for single filers and from $49,000 to $58,000 for married filers.

 

Working Families Tax Relief Act of 2004

The Working Families Tax Relief Act of 2004 extended the JGTRRA AMT exemption limits of $58,000 for married filers and $40,250 for single filers through 2005.

 

Tax Increase Prevention and Reconciliation Act of 2005

The Tax Increase Prevention and Reconciliation Act increased the exemption amount for those filing single from $40,250 to $42,500 and increased the exemption for married filers from $58,000 to $62,550.

 

Tax Increase Prevention Act of 2007

At the end of the 2007, Congress passed the Tax Increase Prevention Act of 2007 to address the AMT. The legislation was a single page and simply increased the exemption limits. The limit for those married filing jointly was increased from $62,550 to $66,250, and the limit for those filing single was increased from $42,500 to $44,350.

 

Alternative Minimum Tax Relief Act of 2008

In September of 2008, Congress passed the Alternative Minimum Tax Relief Act of 2008. This legislation increased the exemption limits for those married jointly from $66,250 to $69,950, and increased the limit for those filing single from $44,350 to $46,200.

 

American Recovery and Reinvestment Act

The American Recovery and Reinvestment Act, otherwise known as the Stimulus, had provisions within it to increase the exemptions for the AMT from $69,950 to $70,950 for those married filing jointly, and from $46,200 to $46,700 for single people.

 

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 increased the AMT exemption limits for both 2010 and 2011. For those who file single and head of household, the law changed the exemption limits from $46,700 to $47,450 for 2010 and to $48,450 for 2011. The exemption limits for married filers were increased from $70,950 to $72,450 in 2010 and to $74,450 for 2011.

 

The Capital Gains Tax

A capital gains tax is a tax charged on the profit realized on the sale of a non-inventory asset that was purchased at a lower price. The most common capital gains are realized from the sale of stocks, bonds, precious metals and property. The tax rate placed on capital gains is determined by the length of time that the seller has held the item and the tax rate that person is in.

Omnibus Budget Reconciliation Act of 1990

Prior to this legislation, a person was taxed on their capital gains at a rate equal to their income level. This legislation changed that by enacting a 28% limit if the seller was in the newly created 28% bracket and had held the capital asset for more than one year.

 

Omnibus Budget Reconciliation Act of 1993

The capital gains tax rates were changed by this law to match to the new tax brackets if the seller owned the item for less than one year. However, the 28% maximum was still honored if the asset was held for longer.

 

Taxpayer Relief Act of 1997

The Taxpayer Relief Act of 1997 made a number of changes to the capital gains tax rate, the estate tax, and the AMT. The primary change to the capital gains rates was the establishment of a new time limit of five years and set a maximum of 20% for any asset held over that length of time with a phase-in to lower that rate to 18% in 2006. It established a 10% rate for the lowest earners in the 15% tax bracket with a phase-in schedule to take the amount to 8% by 2001. It also exempted the capital assets of a house from taxes, if it was the principle residence. The rates shown below with an (a) were set to be drawn down to 8% in 2001, and the rates with a (b) were set to be reduced to 18% in 2006.

The phase-in of the capital gains rates established in the Taxpayer Relief Act of 1997 through 2003. At this time, the progression of those taxes was changed in the Jobs and Growth Tax Relief Reconciliation Act of 2003.

 

 

Jobs and Growth Tax Relief Reconciliation Act of 2003

In 2003, the Jobs and Growth Tax Relief Reconciliation Act of 2003 changed the progression of capital gains taxes established in the 1997 law. It implemented a 5% capital gains tax rate for the two lowest brackets which would go to 0% after 2007. It also circumvented the scheduled drop in the capital gains rate from 20% to 19% for items held over 5 years and established a 15% bracket in their place. The tables below show the immediate affects of the law of moving to a 5% rate, and the eventual phase-in of the rate to 0% for the lowest brackets.

 

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

The The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was a compromise between the Democrats and Republicans to extend both unemployment benefits and the Bush tax cuts - the EGTTRA and the JGTTRA. The legislation extended the capital gains rates for two additional years, meaning that the chart above is valid until 2012.

 

Excise Taxes

Excise taxes are taxes placed when a person purchases a specific good. Excise taxes are placed on gasoline, tobacco, alcohol, and other items. For the purposes of alcohol and tobacco, there have been three pieces of legislation that increased the excise taxes since 1990. These pieces of legislation are:

  • The Omnibus Budget Reconciliation Act of 1990
  • The Balanced Budget Act of 1997
  • The State Children's Health Insurance Reauthorization Program of 2009

These three laws increased the amount of tax on alcohol and/or tobacco. The table shows the amount of increase for each type of tobacco or alcohol product. The 2009 SCHIP reauthorization pays for an expansion in health insurance to children by large increases in tobacco taxes.

    

Taxpayer Relief Act of 1997

The Taxpayer Relief Act of 1997 effected the estate tax and the capital gains taxes as previously described. The measure initially passed the House on June 26 in roll call 245, and initially passed the Senate the following day in roll call 160. One month later, the Senate voted to pass the unified version of the legislation in roll call 211.

 

Economic Growth and Tax Relief Reconciliation Act of 2001

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) was the first and most significant of the "Bush tax cuts." The legislation affected the income tax rates, the AMT, and other taxes. The legislation initially passed the House and the Senate on May 16 and May 23, 2001 in roll calls 118 and 165. The conference report on final passage of the legislation passed the House and Senate days later in roll calls 149 and 170.

 

Jobs and Growth Tax Relief Reconciliation Act of 2003

The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) sped up the implementation of the income tax and capital gains tax cuts provided in the EGTRRA. The legislation passed the House and Senate in roll calls 182 and 179 respectively. The conference report to pass the final form of the legislation passed on almost identical votes.

 

Significant Votes

 

House Votes on Taxes
YearRoll CallLegislation
2000392Marriage Tax Relief Reconciliation Act of 2000
2000254Death Tax Elimination Act of 2000
200184Death Tax Elimination Act of 2001
2001118Economic Growth and Tax Relief Reconciliation Act of 2001
2002404Job Creation and Worker Assistance Act of 2002
2003182Jobs and Growth Tax Relief Reconciliation Act of 2003
2004472Working Families Tax Relief Act of 2004
2004259American Jobs Creation Act of 2004
2004138A bill to end the marriage penalty
2005621Tax Increase Prevention and Reconciliation Act of 2005
2006533Tax Relief and Health Care Act of 2006
2006422Pension Protection Act of 2006
20071153AMT Relief Act of 2007
20071081Tax Increase Prevention Act of 2007
2008455Alternative Minimum Tax Relief Act of 2008
  

Senate Votes on Taxes
YearRoll CallLegislation
2000215Marriage Tax Relief Reconciliation Act of 2000
2001165Economic Growth and Tax Relief Reconciliation Act of 2001
2001112The Marriage Penalty
200244Job Creation and Worker Assistance Act of 2002
2003196Jobs and Growth Tax Relief Reconciliation Act of 2003
2004211American Jobs Creation Act of 2004
2004188Working Families Tax Relief Act of 2004
2006230Pension Protection Act of 2006
2006229Estate Tax and Extension of Tax Relief Act
2006164Death Tax Repeal Permanancy Act
200610Tax Increase Prevention and Reconciliation Act of 2005
200783The Estate Tax
2007108Full Repeal of AMT
200878The Alternative Minimum Tax
200850The Estate Tax
2012184Continue Bush Tax Cuts for all Except top Earners
2012183Continue All Bush Tax Cuts

 

Additional Legislation

Each year, there are numerous bills introduced that are not voted on in the House or Senate. These bills may be sponsored by numerous people and a representative's co-sponsorship of that legislation gives insight into that person's viewpoints.

Senate Bills on Taxes
SessionBill NumberCo-SponsorsBill Title
112S 135Fair Tax Act of 2011
112S 114Permanent Marriage Penalty Relief Act of 2011
112S 1060Telephone Excise Tax Repeal Act of 2011
111S 2964The Fair Tax
111S 745Permanent Marriage Penalty Relief Act of 2009
111S 2964Fair Tax Act of 2009
111S 5065Stop Tax Haven Abuse Act
111S 377327Tax Hike Prevention Act of 2010
111S 56722A bill to repeal the sunset on the reduction of capital gains rates for individuals and on the taxation of dividends of individuals at capital gains rates
111S 288215Taxpayer Responsibility, Accountability, and Consistency Act of 2009
111S 321512Taxpayer Bill of Rights Act of 2010
111S 30478Tax Code Termination Act
111S 18154Permanent Marriage Penalty Relief Act of 2007
110S 10254The Fair Tax Act of 2007
110S 50243Capital Gains Rates
110S 87126Savings for Working Families Act of 2007
110S 1425Invest in America Act
109S 253Fair Tax Act of 2005
109S 98825Jobs Protection and Estate Tax Reform Act of 2005
109S 42024Death Tax Repeal Permanency Act of 2005
109S 110320Individual Alternative Minimum Tax Repeal Act of 2005
109S 7811Permanent Marriage Penalty Relief Act of 2005
109S 711Jobs and Growth Tax Relief Act of 2005
105S J Res 925Constitutional Amendment - Raising Taxes
105S 7530Family Heritage Preservation Act
 

House Bills on Taxes
SessionBill NumberCo-SponsorsBill Title
112H R 2555Fair Tax Act of 2011
112H R 642To amend the Internal Revenue Code of 1986 to prevent corporations from exploiting tax treaties to evade taxation of United States income
112H R 866End Tax Uncertainty Act of 2011
112H R 990Fair and Simple Tax Act of 2011
112H R 14331Permanently Repeal the Estate Tax Act of 2011
112H R 1580EXPENSE Act of 2011
112H R 17746Death Tax Repeal Act
112H R 1850Permanent Tax Relief Act of 2011
112H R 54728Individual AMT Repeal Act of 2011
112H R 866End Tax Uncertainty Act of 2011
111H R 2543Fair Tax Act of 2009
111H R 47070Economic Recovery and Middle-Class Tax Relief Act of 2009
111H R 126566Stop Tax Haven Abuse Act
111H R 155265Start Up Expenses
111H R 20551Death Tax Repeal Act
111H R 2543Fair Tax Act of 2009
111H R 346318Death Tax Repeal Permanency Act of 2009
111H R 78217Taxpayer Choice Act of 2009
111H R 34292Generate Retirement Ownership Through Long-Term Holding Act of 2009
111H R 208512Religious Freedom Peace Tax Fund Act of 2009
110H R 2572Fair Tax Act of 2007
110H R 2380167Death Tax Repeal Permanency Act of 2007
110H R 2734146Tax Increase Prevention Act of 2007
110H R 158693Death Tax Repeal Act of 2007
110H R 381890Taxpayer Choice Act of 2007
110H R 251792Fair Tax Act of 2007
110H R 136664Individual AMT Repeal Act of 2007
110H R 722352Free Market Protection Act of 2008
110H R 213649Stop Tax Haven Abuse Act
110H R 499550Middle Class Jobs Protection Act of 2008
110H R 510999Economic Growth Act of 2008
110H R 590833Zero percent tax rate for the net capital gains
110H R 231235To make permanent the individual income tax rates for capital gains and dividends.
109H R 2559Fair Tax Act of 2005
109H R 212173Generate Retirement Ownership Through Long-Term Holding Act of 2005
109H R 263144Religious Freedom Peace Tax Fund Act
108H R 250Fair Tax Act of 2003
107H R 25257Fair Tax Act of 2001
106H R 25250Fair Tax Act of 1999

 

Appendix - Income Tax Rates Since 1913 

 

 

[1] Website: IRS Article: The Estate Tax: Ninety Years and Counting Author: Darien B. Jacobson, Brian G. Raub, and Barry W. Johnson Accessed on: 04/19/2011