Tax reform, like the weather, is something everybody seems to talk about but no one ever does anything about. That statement might be one that many people would agree with, but which might not be accurate. In fact, there are times in American history when legislators might have done too much to reform taxes.

Over the more than two centuries of United States history there have been a number of periods in which the tax structure of the country has been overhauled, most occurring in the last half of the 20th century. During these periods, income taxes have been instituted and repealed, brought back, modified, increased, and lowered. The one constant is that government always is going to need money to operate and taxes are here to meet that need.

Tax Regimes

Historians and tax experts speak in terms of "tax regimes," periods in which taxation policy is formed and administered before being reformed into another regime, each marked by a national crisis, such as a war or economic depression. In his book, "Federal Taxation in America: A Short History," expert W. Elliot Brownlee asserts there have been five such tax regimes, the first lasting from 1789 until the Civil war.

During this period, taxes were raised through tariffs on imported goods. The second lasted from 1862 until World War I, the third from 1916 until 1931, the fourth (and shortest) lasted during the first two terms of President Franklin Roosevelt, and the fifth, which continues until today, covered World War II.

Types of Taxes

Over the course of these so-called tax regimes, the rate and type of taxes has varied, with Federal revenues ranging from less than 2 percent of the Gross Domestic Product (GDP) to more than 20 percent. Taxes originally were paid mostly by the rich, but now are spread over the entire population. While still part of the fifth tax regime, the specifics of tax reform has evolved during the past 50 years, with the most changes being made by Presidents Ronald Reagan, Bill Clinton, and George W. Bush.

The broadest of these reforms came under President Reagan in 1986 when tax brackets were shifted and the highest bracket reduced. President Clinton undertook tax reform that saw an increase in taxes but ushered in a period of economic growth. The most recent tax reform efforts came in 2001 and 2003 under President Bush, which included cuts in both income taxes and the capital gains tax.

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