The Tax Reform Act: Past, Present, And Future

The history of the tax reform act in the United States dates as far back as 1862, when the flat tax system created by the Revenue Act of 1861 was replaced with a progressive or tiered tax system. There have been numerous attempts over the years to regulate the tax system in the U.S., culminating in ratification of the 16th amendment to the U.S. Constitution on February 3, 1913.

ERISA, COBRA and EGTRRA

In recent times the tax reform acts impacted rules on retirement savings as established by the Employee Retirement Income Security Act of 1974 (ERISA) and the continuation of employee health benefits as in the case of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The Internal Revenue Code was last changed in 1986 and the last major reform to the tax code came about through the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). EGTRRA made changes to the rules governing retirement accounts (ERISA) and lowered the tax rates for individual taxpayers.  

Repeal of the Estate Tax

EGTRRA also reduced the estate tax by increasing the amount allowed to be excluded on an annual basis until the year 2010, at which point the estate tax becomes 0 percent. If Congress does not take action to continue the repeal of the estate tax after 2010 by renewing EGTRRA, the estate tax will return and many of the reductions in individual tax rates will be eliminated.

 

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