The tax strategies of America’s presidents have a profound impact on the country and its future. Given the recent changes to tax law, this Presidents’ Day, we’re taking a look at which heads of state have been influential contributors to our nation’s tax history.

Presidents who added or increased taxes

For much of its early history, America had no Federal taxation. However, over time, steady funding became a necessity and the government began introducing Taxes to ensure that reliability:

• President Lincoln (1861-1865) imposed the nation’s first federal income tax when he signed the Revenue Act of 1861. Designed to fund the Civil War, this temporary income tax saw several changes over a decade but ultimately ended in 1871.
• President Taft (1909-1913) passed the 16th Amendment in 1909, which expanded the federal government’s ability to collect income taxes, and also introduced corporate income taxes.
• President Wilson (1913-1921) added individual income taxes in 1913.
• President Roosevelt (1933-1945) signed the Social Security Act, which imposed a “payroll” tax on both employees and their employers. These taxes are now the sole source of income for millions of retired workers.
• Although the concept has been around since 1797, in 2013, President Obama finally established the first permanent estate tax, which collects revenues from the estate of a deceased person.

Each of these tax types was momentous because they led to a new base of federal revenue that applied to all sectors of the population.

Boosting federal revenues has also been necessary at times, and many presidents have increased the tax rates on both individuals and corporations to achieve national fiscal goals. President Truman is responsible for the largest tax increase in history when his Revenue Act of 1951 raised America’s tax contribution to the Gross Domestic Product (GDP) by just over 1.5 percent. By comparison, the GDP increase attributed to Obama’s Affordable Care Act was only 0.45 percent, and President Reagan’s tax increase in 1982 added only 0.8 percent.

Presidents who reduced taxes

Several presidents have also reduced tax rates, believing that less taxation puts more liquid capital back into the economy.

Here are some highlights:

• President Obama is responsible for the two most significant tax reductions in history, in 2010 and 2012, which, together, dropped federal revenues by a combined $531B. The economic growth rate rose from -2.8 percent to +2.5 percent in his first year, and averaged 1.5 percent over the course of his presidency, as the country recovered from the Great Recession of 2007-2009.
• President Reagan’s “Economic Recovery Act of 1981” lowered federal tax revenues by $208 billion, but the GDP grew 3.5 percent during his presidency.

Today’s Tax Reforms

Compared to the reductions noted above, the recent tax law changes are the fourth largest in history, reducing the federal tax revenue stream by between $150 and $200 billion per year. The new system reduces individual income taxes and significantly changes available deductions to reduce taxable income in general.

However, there is much debate about the overall impact that the new tax law will have on taxpayers over time. Some estimates assert that 80 percent of Americans will see an immediate tax reduction, although how much they realize depends on, most notably, the types of deductions they had used previously, and the level of state taxes they pay, which will vary based on the state in which they live. Others posit that over 4 percent of taxpayers will see an increase in their taxes.

Considering the complexity of tax law, it’s no surprise that you are now facing a new and daunting federal tax system that will affect your financial decisions for years to come. And, because the new system is so different from what was in place previously, there are few guides available to assist you. As you move forward with strategizing your 2018 tax year, consider seeking the assistance of an experienced tax attorney or other tax professional who can help you make the most of your new tax situation.

The post American presidents in tax history appeared first on Rocket Lawyer.