Hey everyone, I’m Bette Hochberger, CPA, CGMA. Talking about taxes may sometimes feel like trying to solve a tricky puzzle. Over time, this puzzle has changed a lot. So for today’s quickie, we’re hopping into our time machine and looking back at some big changes to tax laws in U.S. history. Let’s see how these rules have shaped the world of money and taxes we know today.
The Revenue Act of 1862:
During the U.S. Civil War, America saw its first income tax. The government needed money to fight the war, and this tax was their solution. Though this law didn’t stick around, it introduced the idea of a federal income tax, which would later become a permanent part of the U.S. Constitution.
The 16th Amendment, 1913:
Fast forward to 1913, when the 16th Amendment came about. This big change allowed the government to collect an income tax without having to split it up among the states or base it on population size. This paved the way for the income tax system we know today.
The Revenue Act of 1935, or the “Wealth Tax Act”:
During the Great Depression, President Roosevelt came up with new tax rules. These rules aimed to balance out wealth and fund government programs. This Act increased taxes for rich people and big companies and still influences discussions about money and taxes today.
The Tax Reform Act of 1986:
This law changed the game for income tax. It simplified taxes by removing many deductions, lowering the top tax rate, and increasing personal exemptions. It also bumped up the standard deduction and introduced the Child Tax Credit. This Act led accountants to rethink their tax planning strategies.
The Tax Cuts and Jobs Act of 2017:
This is one of the most impactful tax laws of our time. It reduced taxes for corporations, changed how foreign profits are taxed, and created a new tax break for pass-through income. It also put a cap on some individual deductions. This law reshaped the world of taxes, pushing accountants to adjust quickly to new rules.
When we look back at these tax laws, we see a pattern – tax rules change over time, often because of wider economic conditions and political ideas. But through all these changes, one thing stays the same: the need for skilled accountants to guide people and businesses through the tax puzzle.
Each of these laws brought new challenges and opportunities for our work. We’ve had to stay sharp, constantly updating our knowledge and skills to give the best advice to our clients. And if the past tells us anything, it’s that we’ll keep doing so as tax laws change.
I hope you learned something new today. As always, stay safe, and I will see you next time.
