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Grassley: Q&A on the Federal Income Tax

Senator Charles Grassley
Senator Charles Grassley

From Senator Charles Grassley –

Q:    How much of the revenue going to the U.S. Treasury is federal income tax?
A:    Individual income taxes account for about 42 percent of all the money collected by the federal Treasury.  The rest comes from Social Security taxes, corporate income taxes, excise taxes, estate and gift taxes, customs, and miscellaneous taxes.  The federal income tax as we know it was established as a direct tax 100 years ago, when the 16th amendment to the U.S. Constitution was ratified on February 3, 1913.  The amendment gives Congress the “power to lay and collect taxes on incomes.”  The first income tax levied under the amendment applied a seven-percent rate to those earning over $500,000, today’s equivalent of more than $10 million.

Q:    What tax policy did Congress make permanent on January 1, 2013?
A:    By way of a last-minute deal, legislation was enacted this month to make permanent most of the individual income tax relief first passed in 2001.  I authored these tax cuts as chairman of the Senate Finance Committee at that time and worked to extend them in 2010.  They were set to expire at the end of 2012.  The 2001 tax cuts reduced income tax rates across-the-board, including the creation of the first-ever 10-percent tax bracket for lower-income taxpayers.  The 2001 law also reduced the marriage penalty, repealed limitations on personal exemptions and itemized deductions, expanded refundable credits, and enhanced education tax incentives.  The 2001 tax relief also reduced estate tax liabilities by increasing the amount of an estate exempt from taxation and by lowering the tax rate.  All of this, except the rates on higher income taxpayers and some of the estate tax relief, has now been made permanent law.  In addition, there’s now permanent relief from the Alternative Minimum Tax for middle-class families who were never supposed to pay this tax on the extremely wealthy.  Although I certainly support extending the tax relief I authored, I didn’t vote for this latest deal because the overall agreement failed to take on Washington’s spending problem at all.  In fact, overall, it raised taxes by $617 billion and even increased federal spending.  Along with tax relief, structural reforms to control excessive spending in Washington are needed to safeguard opportunities for future generations of Americans.

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