May 31, 2025
The Tax Cuts and Jobs Act (TCJA) of 2017 can be seen as a major overhaul of the U.S. tax code, signed by President Donald Trump. It lowered the corporate tax rate from 35% to 21% in addition to reducing individual income tax rates across most brackets. The Tax Cuts and Jobs Act (TCJA) lowered the top marginal rate from 39.6% to 37%. It also raised the thresholds for higher tax brackets.
Significance:
- Trump’s Tax Cuts and Jobs Act (TCJA) lowered the Top Marginal Tax Rate from 39.6% to 37% for Income above $600,000 ($763,000 in 2025)
- TCJA eliminated the Affordable Care Act’s Individual Mandates tax penalty
- TCJA kept the bottom bracket the same at 10%, lowered the rest of the brackets, kept the 35% bracket the same, and lowered the Top Marginal Tax Bracket to 37%
- Major reduction to the Corporate tax rate from 35% to 21%
- Moved indexes from CPI to Chained CPI, in essence a slow tax increase allowing Bracket Creep over time
- Limited State and Local Tax (SALT) deductions to $10,000 a move largely impacting high income states
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May 31, 2025
The Obama administration allowed the Bush-era tax cuts to expire for top earners as part of the American Taxpayer Relief Act of 2012. Beginning in 2013, the Top Marginal Income Tax Rate reverted to 39.6% for individuals earning over $400,000 and couples earning over $450,000.
Significance:
- Majority of early 2000’s Bush Tax cuts set to expire in “Fiscal Cliff” with expirations in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA)
- The American Tax Payer Relief Act of 2012 (ATRA) extended many Bush Tax cuts while letting some expire avoiding the full effects of the Fiscal Cliff.
- The ATRA significantly increased the AMT exemption amounts and indexed them for inflation
- Top Marginal Tax Rate increased from 35% to 39.6% for incomes over $400,000 ($557,000 in 2025)
- Despite significant financial events from the 2008 Great Recession, those were mostly handled through credits and not reductions in Marginal Tax Rates
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May 31, 2025
The 1990’s maintained the relatively low Marginal Tax Rates with slight increases by two Presidents. President George H. W. Bush signed the Omnibus Budget Reconciliation Act of 1990 (OBRA 1990) in 1990 raising the Top Marginal Tax Rate from 28% to 31% . In 1993, President Bill Clinton increased it further from 31% to 39.6% for high-income earners through the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993), aiming to reduce the deficit and to increase fairness.
Significance:
- Gradual increases in the Marginal Tax Rates in both the OBRA 1990 and OBRA 1993 Acts from 28% to 39.6%
- The Bush tax rate increase came after he famously was quoted as “Read my lips. No new taxes.“
- AMT was increased to a top tier of 28%
- OBRA 1993 created a Top Marginal Tax Rate of 39.6% on Income over $250,000 ($553,000 in 2025)
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May 31, 2025
The Reagan Era saw a large reduction in tax rates, a continuation of post World War II trends, and a significant jump in Federal Revenue by the end of his first term. The Economic Recovery Tax Act of 1981 began a phased reduction of the top rate from 70% to 50%. The Tax Reform Act of 1986 cut the top rate further from 50% to 28% while dramatically reducing the number of brackets and simplifying the tax code.
Significance:
- Top Marginal Tax rates dropped from 70% to 28% during this period.
- Reduction and simplification of rates from 34 Tax Brackets in 1978 to just 2 in 1989 at 15% and 28% for incomes over $30,950 ($79,820 in 2025)
- This period reduction saw in Volker Era period of high interest rates from a peak of 21% in 1980 to ~9-12% in the Reagan’s first term
- Inflation peaked in 1980 at 14.8%
- The period saw a increase in Cold War Era spending, and deficit increases
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May 31, 2025
Throughout the 1970s, the top marginal rate was at 70% but inflation eroded the real value of income thresholds due to the lack of indexation for inflation. This phenomenon is known as “bracket creep” Congress enacted minor reforms, but there was no major reduction in the top marginal rate that occurred during that decade. The Tax Reform Act of 1976 adjusted deductions while the top marginal tax rate remained at 70%.
Significance:
- High inflation pushed wages up and introduced the concept of Bracket Creep pushing people into higher Marginal Tax Brackets
- While the Top Marginal Tax Rate was lower than its World War II peaks, it was still a significant 70%
- The 70’s saw a proliferation of uses of Tax Shelters by Wealthy and Corporations
- The Tax Reform Act of 1976 sought to close Tax Loopholes, and expand the Alternative Minimum Tax (AMT)
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