Some of the biggest and most cherished deductions in the current tax code are for interest on mortgage payments, medical expenses, state and local taxes, charitable donations and savings for retirement. The federal government first levied the income tax in 1913, and the tax code has been modified many times since. One dramatic change in the last several decades has been the reduction in the top rate, paid by the richest Americans. In 1963, the top income tax rate was 91 percent. Currently, there are five tax rates, ranging from 15 percent to 39.6 percent.
Most taxpayers are in the lowest bracket.
The Recent Changes In spite of all the recent talk about tax reform, the changes in tax law passed in the summer of 1997 as part of the balanced-budget agreement were far from sweeping. Largely targeted at families, students, investors, homeowners, businesses and other special interests, they actually added to the voluminous internal revenue code. Tax rates on income from investments and inheritances were somewhat lowered. Simplification and Efficiency Some of the proposals to change the tax system are fairly minor, but some call for major structural changes. A common rallying cry is simplification.