Forgotten Tax Increases

The only good thing we can say about taxes going into 2016 is that at least they are not going up this year. Such was not the case in 2013, 1991, 1993—and especially 1994. In fact, the “Bush tax cuts” notwithstanding, the forgotten tax increase of 1994 is still with us.

Early in 2013, to avert the “fiscal cliff,” the lame duck Congress passed, with the help of 40 Republicans in the Senate and 85 Republicans in the House, the American Taxpayer Relief Act of 2012 (PL 112-240, H.R.8). The six tax brackets (10, 15, 25, 28, 33, and 35%) of the so-called Bush tax cuts (the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003) that were set to expire at the end of 2010 until they were extended, with modifications, by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ((PL 111–312, H.R.4853), were made permanent. However, for those earning over $400,000 a year ($450,000 for married couples), the top marginal tax rate increased to 39.6 percent. Additionally, the estate tax rate increased, the tax rates on long-term capital gains and dividends were raised on higher-income taxpayers, the personal exemption and itemized deduction reductions were reinstated, the temporary payroll tax cut of 2011 and 2012 was not extended, and refundable tax credits were expanded.Houses of Congress for over four years under President Bush, they could have easily rolled back the Medicare “contribution and benefit base” to the same as that for Social Security. They actually could have done a lot of things. Like make the “Bush tax cuts” permanent. Like eliminate some tax brackets. Like cut taxes even further. Like eliminate refundable tax credits. Like eliminate the alternative minimum tax. Like cut anything from the federal budget. Instead, they drastically increased spending and the national debt.

It was actually President Obama who presided over the only payroll tax cut in history. As part of the deal to extend the “Bush tax cuts,” the employee share of Social Security taxes was reduced from 6.2 to 4.2 percent for 2011. And when Obama proposed extending this payroll tax cut for another year, Republicans generally opposed doing so.

Republicans seem to have forgotten about the huge tax increase in 1994. They break their arms patting themselves on the back for inaugurating and extending the “Bush tax cuts” even though some Americans still had to turn over 35 percent of their income to the federal government. And that was just to pay their income tax. On top of that they had to pay their payroll taxes, federal excise taxes on gasoline and airline tickets, and state and local taxes. Even under the Bush regime, with Republicans fully in charge, Americans were heavily taxed. And regardless of what the Republican presidential candidates say about tax reform, don’t expect anything to really change. Republicans, after all, just like Democrats, think the U.S. government is entitled to a portion of every American’s income.

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