History

• Upon adoption of the Constitution in 1789, the federal government was granted with authority to raise taxes "...to pay the Debts and provide for the common Defense and general Welfare of the United States." Congress passed the Revenue Act of 1861 to restore excise taxes and to impose a tax on personal incomes.
  
  

Significance

• Tax relief programs must take into account adjustments for inflation--the rising costs of goods and services--in order to make lowering tax rates effective. If this is overlooked, the result serves to push taxpayers into a higher tax bracket, which nullifies the effect of getting a tax cut.
  
  

Taxpayer Relief Acts

• In 1997, numerous tax breaks were given to individuals and families, as well as small businesses. They included college tuition tax credits and education IRAs, and credits for health insurance coverage. In 2009, the American Reinvestment & Recovery Act included homebuyer credits, reduced COBRA health insurance premiums and home energy efficiency tax incentives, as well as many others. Small businesses also benefited from this tax relief act.