Tax Reform Act of 1969

Background

Richard Nixon made tax reform a major domestic priority of his presidency. 1969 was the year Nixon took office, where liberal Democrats the year before had been repudiated at the polls through the defeat of Democratic candidate Hubert Humphrey. As the Democratic administration of Lyndon Johnson had passed the "Great Society" package of welfare programs in 1964-1965, Nixon's bill was the Republican response. It stressed not so much increasing government spending, but taking the government out of the lives of the poor and increasing taxes on the rich.

Nixon demanded that the wealthy pay more taxes. Up until 1969, the American wealthy were using their legal clout to avoid paying most federal taxes.In an effort to eliminate the attraction of tax shelters, this law lowered rates for the higher tax brackets. The IRS was beefed up and given more power to go after tax evaders. Taxes on cars and telephones were increased by delaying planned reductions on excise taxes on these items. The bill also increased the minimum tax on corporations, adjusted for size and gross income.

Nixon stated that "more than 9 million low-income people who pay taxes will be dropped from the tax rolls." This bill stopped poor people paying federal taxes of any kind. In addition, it also added incentives for the tax code for developers to rebuild and refurbish old housing as opposed to building new houses the poor could not afford. Personal exemptions for poorer and middle class taxpayers was increased depending on income.

For middle class taxpayers, this bill increased the standard tax deduction from $300 to $1,000, while also increasing the deductions --- if considered as a percentage --- from 10 to 15 percent. Nixon made it clear that one aspect of this bill was to eliminate any bias against single people filing taxes. On the other hand, Nixon held that the new tax code was biased towards consumer spending, while, worried about rising inflation, thought that savings should be stressed. While generally supporting the bill, Nixon thought that it would create a budget deficit, which in 1969 was considered irresponsible. In general, Nixon wanted interest rates lowered through higher savings rate rather than stimulating the economy through spending, which he thought the bill stressed.