Thirty years ago, mostly because of a Senator who had been a star basketball player for the NY Knicks, we got one of the best tax laws the Congress has ever passed.
Where are we going? From 1986 to the candidates’ income tax proposals.
Why Marginal Tax Rates Plunged
With bipartisan support, the 1986 Tax Reform Act was approved by two-thirds majorities in the House and Senate. Vastly diminishing individual income tax rates for many taxpayers as well as the number of marginal brackets, it was acceptable to republicans and democrats because it gave everyone something. With the public believing the wealthy had been getting away with preferential treatment, the 1986 act eliminated the tax loopholes that let affluent individuals sidestep that 70% or 50% bracket. Meanwhile President Reagan liked the low rates and could say that revenue would remain neutral compared to past tax legislation.
Although the President signed the tax act on October 23, 1986, it took until 1988 for its provisions to be fully implemented:
Starting during the 1990s, marginal brackets once again multiplied. In the following “tax year 2015” rate table, the IRS notes its calculations:
The Candidates’ Proposals
You can see below that each plan echoes the past:
Individual Income Tax Rate Proposals
Our Bottom Line: Progressive Taxation
When economists say we have a progressive approach to taxation they mean that those who earn more pay a higher percent of their income than those who earn less. As a metric for judging tax history and the candidates, we could create our own “progressive barometer” and decide just how high we want it to rise.