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Tax: Federal Role

The present federal income tax dates from the act signed by President Wilson on October 3, 1913. That act was made possible by the ratification of the Sixteenth Amendment to the Constitution adopted on February 3, 1913. Earlier federal income tax laws had been repealed or held unconstitutional. The income tax first became a significant source of revenue during World War I.

Seventeen internal revenue acts passed from 1913 until they were first codified in 1939. The decade of the 1940s saw the income tax become a mass tax covering a large portion of the population. The withholding provisions of today stem from the Current Tax Payment Act of 1943. The deductions for medical and dental expenses, along with marital income splitting, were enacted in the 1940s. The Highway Trust Fund was set up in 1956 which increased excise taxes on vehicles and products connected with the use of public highways.

The 1960s saw the introduction of the investment tax credit and the enactment of income-averaging provisions. Surcharges were enacted in 1968 and 1969, because of the Vietnam War. A major reform of the tax laws, and the establishment of the individual Alternative Minimum Tax (AMT), was provided in the Tax Reform Act of 1969. The decade of the 1970s was one of reform and simplification, with major tax acts passed in nearly every year. The Tax Reform Act of 1976 provided numerous reform measures, particularly with regard to syndicates and limited partnerships as well as estate and gift taxes.

The beginning of the 1980s witnessed the passage of the Crude Oil Windfall Profits Tax Act and the Economic Recovery Tax Act of 1981, the latter intended to stimulate economic growth. The theme of the 1980s, however, was primarily one of reducing the federal government's large budget deficits. Deficit reduction laws included the Deficit Reduction Act of 1984, the Omnibus Budget Reconciliation Act of 1987, the Technical and Miscellaneous Revenue Act of 1988, and the Revenue Reconciliation Act of 1989. A comprehensive revision of the federal tax system, with a goal of fairness, efficiency, and simplicity, was enacted as the Tax Reform Act of 1986. This act reduced tax rates, eliminated certain deductions, and broadened the tax base as well as recodified the code.

Like the previous decade, the 1990s continued the theme of reducing the budget deficits with passage of the Omnibus Budget Reconciliation Act of 1990 and 1993. Legislation passed during the mid and late portion of the 1990s largely dealt with tax cuts, tax treatment of healthcare and pension benefits, operation of the Internal Revenue Service and a concern for taxpayer rights.

Over the last 10 years Congress has passed numerous tax bills dealing with issues as diverse as Energy, Healthcare, Pensions, Education, Social Security and Transportation. The major bills, listed by year are:

2006 Acts

  • Tax Relief & Health Care Act of 2006 (PL 109-432)
  • Pension Protection Act of 2006 (PL 109-280)
  • Heroes Earned Retirement Opportunities Act (PL 109-227)
  • Tax Increase Prevention and Reconciliation Act of 2005 (PL 109-222)

2005 Acts

  • Gulf Opportunity Zone Act of 2005 (PL 109-135)
  • Katrina Emergency Tax Relief Act of 2005 (PL 109-73)
  • Energy Policy Act of 2005 (PL 109-58)
  • Provide for the Proper Tax Treatment of Certain Disaster Mitigation Payments (PL 109-7)
  • Extend the Leaking Underground Storage Tank Trust Fund Financing Rate (PL 109-6)
  • Accelerate Charitable Contributions for Tsunami Relief (PL 109-1)

2004 Acts

  • American Jobs Creation Act of 2004 (PL 108-357)
  • Working Families Tax Relief Act of 2004 (PL 108-311)
  • Pension Funding Equity Act of 2004 (PL 108-218)

2003 Acts

  • Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (PL 108-173)
  • Military Family Tax Relief Act of 2003 (PL 108-121)
  • Jobs & Growth Tax Relief Reconciliation Act of 2003 (PL 108-27)

2002 Acts

  • Holocaust Restitution Tax Fairness Act of 2002 (PL 107-358)
  • Trade Adjustment Assistance Reform Act of 2002 (PL 107-210)
  • Clergy Housing Allowance Clarification Bill of 2002 (PL 107-181)
  • Job Creation & Worker Assistance Act of 2002 (PL 107-147)

2001 Acts

  • Victims of Terrorism Tax Relief Act of 2001 (PL 107-134)
  • Railroad Retirement and Survivors' Improvement Act of 2001 (PL 107-90)
  • Internet Tax Nondiscrimination Act (PL 107-75)
  • Economic Growth & Tax Relief Reconciliation Act of 2001 (PL 107-16)
  • Fallen Hero Survivor Benefit Fairness Act of 2001 (PL 107-15)

2000 Acts

  • Installment Tax Correction Act of 2000 (PL 106-573)
  • Community Renewal Tax Relief Act of 2000 (PL 106-554)
  • Foreign Sales Corporation Tax Act (PL 106-519)
  • A Bill to Amend Title 46 to Provide Equitable Treatment with Respect to State and Local Income Taxes for Certain Individuals Who Perform Duties on Vessels (PL 106-489)
  • 527 Organization Disclosure Bill (PL 106-230)
  • Senior Citizens' Freedom to Work Act of 2000 (PL 106-182)

1999 Acts

  • Tax Relief Extension Act of 1999 (PL 106-170)

1998 Acts

  • IRS Restructuring & Reform Act of 1998 (PL 105-206)
  • Tax and Trade Relief Extension Act of 1998 (PL 105-277)

1997 Acts

  • Taxpayer Relief Act of 1997 (PL 105-34)