HOME

TheInfoList



OR:

The
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territo ...
Revenue Act of 1964 (), also known as the Tax Reduction Act, was a tax cut act proposed by President John F. Kennedy, passed by the
88th United States Congress The 88th United States Congress was a meeting of the legislative branch of the United States federal government, composed of the United States Senate and the United States House of Representatives. It met in Washington, D.C. from January 3, 196 ...
, and signed into law by President
Lyndon B. Johnson Lyndon Baines Johnson (; August 27, 1908January 22, 1973), often referred to by his initials LBJ, was an American politician who served as the 36th president of the United States from 1963 to 1969. He had previously served as the 37th vice ...
. The act became law on February 26, 1964. Kennedy proposed the bill on the advice of
Keynesian Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output a ...
economist Walter Heller, who believed that temporary deficit spending would boost economic growth. The act was initially blocked by conservatives like Senator Harry F. Byrd, but Lyndon Johnson was able to guide it through Congress after the assassination of Kennedy in November 1963. The act cut federal
income taxes An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Ta ...
by approximately twenty percent across the board, and the top federal income tax rate fell from 91 percent to 70 percent. The act also reduced the
corporate tax A corporate tax, also called corporation tax or company tax, is a direct tax imposed on the income or capital of corporations or analogous legal entities. Many countries impose such taxes at the national level, and a similar tax may be imposed at ...
from 52 percent to 48 percent and created a minimum standard deduction.


Summary of provisions

The Office of Tax Analysis of the United States Department of the Treasury summarized the tax changes as follows:
* reduced top marginal rate (on income over $100,000, roughly $848,000 in 2021 dollars, for individuals; and over $180,000; roughly $1,527,000 in 2021 dollars, for heads of households) from 91% to 70% * reduced corporate tax rate from 52% to 48% * phased-in acceleration of corporate estimated tax payments (through 1970) * created minimum standard deduction of $300 + $100/exemption (total $1,000 max)


Passage

The President addressed the issue of tax reform before the Economic Club of New York at the Waldorf-Astoria Hotel in New York City on December 14, 1962. On the advice of Walter Heller, the Chairman of the
Council of Economic Advisers The Council of Economic Advisers (CEA) is a United States agency within the Executive Office of the President established in 1946, which advises the President of the United States on economic policy. The CEA provides much of the empirical rese ...
, President John F. Kennedy proposed a tax cut designed to help spur economic growth. Kennedy believed that the tax cut would stimulate consumer demand, which in turn would lead to higher economic growth, lower unemployment, and increased federal revenues. Kennedy's support for a tax cut reflected his conversion to
Keynesian economics Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output ...
, which favored temporary deficit spending in order to boost economic growth. In January 1963, Kennedy presented Congress with a tax proposal that would reduce the top marginal tax rate from 91 percent to 65 percent, and lower the corporate tax rate from 52 percent to 47 percent; in total, the cut was projected to decrease income taxes by about $10 billion and corporate taxes by about $3.5 billion. The plan also included reforms designed to reduce the impact of itemized deductions, as well as provisions to help the elderly and handicapped. Conservatives revolted at giving Kennedy a key legislative victory before the election of 1964 and blocked the bill in Congress.
Lyndon B. Johnson Lyndon Baines Johnson (; August 27, 1908January 22, 1973), often referred to by his initials LBJ, was an American politician who served as the 36th president of the United States from 1963 to 1969. He had previously served as the 37th vice ...
succeeded Kennedy as president after the latter was
assassinated Assassination is the murder of a prominent or important person, such as a head of state, head of government, politician, world leader, member of a royal family or CEO. The murder of a celebrity, activist, or artist, though they may not have a ...
in November 1963. After Johnson agreed to decrease the total federal budget to under $100 billion, powerful conservative Senator Harry F. Byrd dropped his opposition to a tax cut, clearing the way for its passage as the Revenue Act of 1964. Johnson signed the bill into law on February 26, 1964. Passage of the long-stalled tax cut facilitated efforts to move ahead on the
Civil Rights Act of 1964 The Civil Rights Act of 1964 () is a landmark civil rights and labor law in the United States that outlaws discrimination based on race, color, religion, sex, and national origin. It prohibits unequal application of voter registration requ ...
.


Impact

The stated goals of the tax cuts were to raise personal incomes, increase consumption, and increase capital investments. Evidence shows that these goals were exceeded by large degree with the combination of tax cuts and domestic spending programs President Johnson advocated, such as Medicare. Unemployment fell from 5.2% in 1964 to 4.5% in 1965, and fell to 3.8% in 1966. Initial estimates predicted a loss of revenue as a result of the tax cuts, however, tax revenue increased in 1964 and 1965.


References


Works cited

* * * *


External links


Full text of the Act
{{US-fed-statute-stub United States federal taxation legislation 1964 in law