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History Behind The Headlines

This week, Donald Trump laid out his ambitious tax plan, which slashes taxes for individuals and businesses. Right now, it’s difficult to know how all this will look, especially since the nine-page proposal leaves many unanswered questions.

Here’s what we know for sure: according to the New York Times, the plan includes just three tax brackets (there are now seven, with the highest bracket taxed at 39.6 percent). The three brackets will tax individuals at rates of 12 percent, 25 percent and 35 percent. The plan also includes tax credits for children and seniors, as well as an increase of deductions to $12,000 for individuals and $24,000 for married couples. Mr. Trump has also vowed to get rid of the estate tax, which taxes inherited wealth.

The proposal promises to slash the corporate tax rate from 35 percent to 20 percent and reduce the tax on “pass through businesses,” such as partnerships and sole proprietorships, from just under 40 percent to 25 percent. According to the Economic Policy Institute, Trump’s proposed cuts come in the wake of a historic downward trend of corporate tax rates. In the 1950s, for instance, corporations were taxed at over 50 percent.

Pundits predict that passing the plan will prove difficult. In response, Mr. Trump urged Democrats and Republicans to “come together, finally, to deliver this giant win for the American people.” However, Democrats promise that there will be no support for a plan many consider “morally repugnant” in its explicit benefits for the wealthy and corporations.

BackStory looked into the history behind ambitious presidential tax plans, discussing it in a recent First Draft episode.

In the 1960s, for instance, Democratic president Lyndon Johnson sought an ambitious plan to raise taxes to help pay for his “Great Society” poverty reduction plan at home and the Vietnam War abroad. But he had a lot of trouble when he presented the plan to the mostly Democratic Congress.

Brian Balogh says that this was because Johnson’s popularity was slipping due to growing opposition to the war. He adds that it’s also “never easy to raise taxes,” let alone launch a comprehensive tax reform.

“What history suggests is that any kind of comprehensive tax reform is not easy, which is why it has been so long since it has occurred. The reason is that it touches so many interests. Even within Trump’s party, for which tax cuts are a mantra, there are those who care about deficit reduction, which usually runs counter to tax reduction. More broadly, the fight over cutting taxes like the estate tax for rich people is likely to trigger strong debate.”  

For more information, read what Johnson said about the plan upon its signing in 1968 on The American Presidency Project’s website and find more details about current proposals and tax reform at:

whitehouse.gov (Trump’s plan)

taxpolicycenter.org (information on the estate tax)

cbpp.org (Center on Budget and Policy Priorities’ information on corporate tax rates)

cbo.org (Congressional Budget Office’s comparison of international corporate income tax rates)

taxpayeradvocate.irs.gov (information on simplifying the internal revenue code)

About History Behind The Headlines: When breaking news and history collide, BackStory brings the context. This new blog feature takes trending news items and, whenever possible, offers BackStory host commentary or segments from previous episodes that provide a historical viewpoint.