Taxes - Are They Really High?
Nobody likes to pay taxes. If we had to pay a 1 percent income tax rate, we would all complain about it. I certainly would! That being said, are we really paying higher tax rates these days? If you look at the rates the last 40 years, you might be in for a surprise.
The last forty years are often called the era of the modern economy. The early 1970s were when we first started seeing issues like energy and international trade really come to the forefront. The 1980s ushered in periods of big national debt. The 1990s and 2000s gave rise to the internet and a digital revolution in our lives. All and all, it has been a very exciting 40 years.
From a tax perspective, we have seen wild swings in tax rates during this period. The 1970s started off as a high tax period. The top income tax rate was a staggering 50 percent. The maximum long term capital gains rate was at 39.6 percent. The dividend rate? An absolutely unheard of 70 percent. Yes, 70! These numbers are harsh compared to what we pay today.
The 1980s started off with the same rates of the 70's, but then started to drop as the decade moved along. By the end of the decade, the tax rates were known as the golden 28s. Why? The three major indicators had a tax rate of 28 percent. The maximum income rate, the long term capital gains tax and the dividend rate were all pegged at 28 percent. This would represent a low for the 40 year period.
The 1990s were a bit of a mixed bag. Taxes tended to go up with the exception of long term capital gains. That rate dropped to 20 percent. On the other hand, income tax and dividend rate maximums increased to 39.6 percent. The end of the decade saw Bill Clinton leave office and a second Bush become President.
The first decade of the twenty first century was all about the Bush Tax Cuts. For all the conversation about them, they didn't really impact the income tax rate all that much. The top rate dropped from 39.6 percent to 35 percent. Instead, the big changes were in the capital gains and dividend rates. They each dropped to 15 percent.
What do the next 10 years hold? The rates will be increasing. The budget deficits are simply too large to continue without bringing in more revenues. You can get irate about it all you like, but there is no escaping the increases that are coming. A return to 50 percent income tax rates is not out of the question. Prepare yourself. Take the time to sit down with a financial planning professional and come up with a plan to minimize the tax impact you will face.
The last forty years are often called the era of the modern economy. The early 1970s were when we first started seeing issues like energy and international trade really come to the forefront. The 1980s ushered in periods of big national debt. The 1990s and 2000s gave rise to the internet and a digital revolution in our lives. All and all, it has been a very exciting 40 years.
From a tax perspective, we have seen wild swings in tax rates during this period. The 1970s started off as a high tax period. The top income tax rate was a staggering 50 percent. The maximum long term capital gains rate was at 39.6 percent. The dividend rate? An absolutely unheard of 70 percent. Yes, 70! These numbers are harsh compared to what we pay today.
The 1980s started off with the same rates of the 70's, but then started to drop as the decade moved along. By the end of the decade, the tax rates were known as the golden 28s. Why? The three major indicators had a tax rate of 28 percent. The maximum income rate, the long term capital gains tax and the dividend rate were all pegged at 28 percent. This would represent a low for the 40 year period.
The 1990s were a bit of a mixed bag. Taxes tended to go up with the exception of long term capital gains. That rate dropped to 20 percent. On the other hand, income tax and dividend rate maximums increased to 39.6 percent. The end of the decade saw Bill Clinton leave office and a second Bush become President.
The first decade of the twenty first century was all about the Bush Tax Cuts. For all the conversation about them, they didn't really impact the income tax rate all that much. The top rate dropped from 39.6 percent to 35 percent. Instead, the big changes were in the capital gains and dividend rates. They each dropped to 15 percent.
What do the next 10 years hold? The rates will be increasing. The budget deficits are simply too large to continue without bringing in more revenues. You can get irate about it all you like, but there is no escaping the increases that are coming. A return to 50 percent income tax rates is not out of the question. Prepare yourself. Take the time to sit down with a financial planning professional and come up with a plan to minimize the tax impact you will face.
Source...