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Income Splitting Under the Individual Income Tax, Vol. 6 (Classic Reprint)

Income Splitting Under the Individual Income Tax, Vol. 6 (Classic Reprint)

ISBN: 9781332265220
Publisher: Forgotten Books
Publication Date: 2015-09-27
Number of pages: 26
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Excerpt from Income Splitting Under the Individual Income Tax, Vol. 6

In 1948, the Committee on Ways and Means adopted the income-splitting provisions which became a part of the Revenue Act of 1948 as finally enacted. The objectives stated in the report on the 1948 bill were (1) to produce substantial geographical equalization in the impact of the individual income tax on married couples residing in community and non-community-property States; (2) to forestall the unfortunate enactment of community-property legislation by commonlaw States; (3) to reduce the incentive for married couples in common-law States to decrease their taxes by splittmg their income through such devices as trusts, joint tenancies, and family partnerships; (4) to reduce the administrative difficulties stemming from the use of such devices; and (5) to reduce the need for legislation on the income-tax treatment of trusts and family partnerships.

The income-splitting provisions made substantial reductions in the tax liabilities of married couples. In making other decreases in the individual income taxes, the Revenue Act of 1948 provided a larger reduction in tax in the first surtax bracket, the area in which no benefit is derived from income splitting, than in the remaining brackets. In the case of the first$2, 000 of surtax net income the reduction in tax was 12.6 percent; on the surtax net income between $2,000 and approximately $137,000, the reduction was 7.4 percent; and on the surtax net income in excess of $137,000 the reduction was 5 percent. These percentage reductions and the 5 percent reduction provided by the 1945 act were removed by the Revenue Act of 1950. Thus, except for the increase in exemptions, the only major tax reduction feature of the 1948 act which remains is the income-splitting provision.

Prior to the action in 1948 repeated efforts were made to remove the tax differences among married couples. The Committee on Ways and Means took action on this subject in 1921, 1934, and 1941, and the Senate Committee on Finance in 1941. However, the Congress did not adopt any of the proposed legislation.

Beginning in the late thirties, there was a growing movement among non-community-property States to obtain for their residents the income tax advantages of the community-property system.

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