- 55 -
was reduced to 50 percent.29 In 1986, Congress repealed general
income averaging.30 All these provisions were tools Congress had
used to ameliorate the top marginal income tax rates that went as
high as or higher than 70 percent during most of the relevant
periods. After 1986, under the new flatter rate structure, with
a top rate of substantially less than 50 percent, these
provisions were no longer needed. Against the background of
Congressional concerns about ameliorating a high and steeply
progressive rate structure, I don’t believe Congress expected or
intended that the interplay of the newly enacted itemized
deduction and AMT provisions could result in effective rates of
tax substantially exceeding 50 percent up to more than 100
percent of a net recovery.
29 Congress granted another type of relief from the punitive
effects of historically high marginal rates when it enacted the
50 percent maximum tax on personal service income for tax years
beginning after Dec. 31, 1970. Tax Reform Act of 1969, Pub. L.
91-172, sec. 804(a), 83 Stat. 487, 685 (codified as sec. 1348).
However, such relief subsequently was considered no longer
necessary when Congress reduced the highest marginal tax rate on
all types of income to 50 percent, for taxable years beginning
after Dec. 31, 1981. Economic Recovery Tax Act of 1981, Pub. L.
97-34, sec. 101(c)(1), 95 Stat. 172, 183. (repealing sec. 804(a)
of the Tax Reform Act of 1969).
30 In 1986, Congress repealed the income averaging
provisions almost entirely (exception carved out for farming
income). Tax Reform Act of 1986, Pub. L. 99-514, sec. 141(a),
100 Stat. 2085, 2117. Congress believed that changes to the
individual income tax provisions, which provided wider brackets,
fewer rates, and a flatter rate structure with a top marginal
rate substantially less than 50 percent, reduced the need for
complicated income averaging. See H. Rept. 99-426 (1986), 1986-3
C.B. (Vol. 2) 114.
Page: Previous 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 NextLast modified: May 25, 2011