Within the United States, taxation has always been a sore sport for both political parties. While many candidates have campaigned on the backs of promises to deliver lower tax rates across the spectrum of American taxpayers, few have managed to deliver. However, the recent political gridlock in Washington has had a significant effect on taxation rates within the country, as the refusal of both parties to cooperate has changed tax laws that target the middle and lower classes. Furthermore, the recent presidential election has demonstrated that concern over tax trends in the United States continues to be a major voter issue.
Local Rate Increases
Local and state governments have seen significant tax shortfalls, as much of these local revenue streams depend on consumer spending in their geographic area. Many states and municipalities face heavy debt burdens stemming from poor budgeting and have attempted to remedy the situation through heavy local tax increases; cities such as Chicago have increased their sales tax to over 9 percent, and are increasing property and other tax revenue streams in order to balance their budget.
Bush Tax Cuts
As one of the largest tax cuts in American history, the tax cuts enacted under President George W. Bush had a significant effect on tax policies in the United States. The tax cuts dramatically lowered tax rates for individuals across the board, by lowering the highest marginal income tax rate from 39.6 to 35 percent. Furthermore, policies within the tax cuts lowered the tax rate for high income individuals, under the premise that lower tax rates will spur federal revenue streams by de-incentivizing tax avoidance schemes used by the wealthy. While the tax cuts expired at the end of 2012, the cuts were maintained for individuals making less than $400,000 and for couples earning below $450,000. For taxpayers above this income bracket, the cuts were rescinded and rates went up to their pre-2000 highs.
Historically, the tax trends within the United States have been dominated by cuts as the government moves away from the high rates enacted under the Roosevelt administration in the wake of the Great Depression. Previously, the highest marginal tax rate in the United States reached 90 percent, which was seen as draconian by later policymakers. While tax cuts have been slow to be enacted, major reforms were undertaken under the Reagan administration, which inspired the recent cuts placed by President Bush. The recent recession, however, has spurned increases within the federal tax rates as the government seeks to bolster ailing revenue streams. It is predicted that future administrations will seek to increase tax rates to support social spending as well as other neglected parts of the national budget.
In the long-term, it is anticipated that tax rates will continue to increase across the board in the United States. Governments and citizens have come to realize that they cannot expect effective government services if there government deficits stemming from low tax rates. Although many political parties are advocating tax decreases and smaller governance, many citizens see these movements as a method of greater wealth concentration for the top 1 percent of income earners. While the tax increases may seem relatively large, historically they remain low in comparison to tax rates under the Roosevelt administration.