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The United States Revenue Act of 1964 (Pub.L. 88–272), also known as the Tax Reduction Act, was a bipartisan tax cut bill signed by President Lyndon Johnson on February 26, 1964. Individual income tax rates were cut across the board by approximately 20%. In addition to individual income tax cuts, the act slightly reduced corporate tax rates and introduced a minimum standard deduction.
The Office of Tax Analysis of the United States Department of the Treasury summarized the tax changes as follows:
- reduced top marginal rate from 91% to 70%
- reduced corporate tax rate from 52% to 48%
- phased-in acceleration of corporate estimated tax payments (through 1970)
- created minimum standard deduction of $300 + $100/exemption (total $1,000 max)
President John F. Kennedy brought up the issue of tax reduction in his 1963 State of the Union address. His initial plan called for a $13.5 billion tax cut through a reduction of the top income tax rate from 91% to 65%, reduction of the bottom rate from 20% to 14%, and a reduction in the corporate tax rate from 52% to 47%. The first attempt at passing the tax cuts was rejected by Congress in 1963.
Kennedy was assassinated in November 1963, and was succeeded by Lyndon Johnson. Johnson was able to achieve Kennedy's goal of a tax cut in exchange for promising a budget not to exceed $100 billion in 1965. The Revenue Act of 1964 emerged from Congress and was signed by Johnson on February 26, 1964.
The stated goal of the tax cuts were to raise personal incomes, increase consumption, and increase capital investments. Evidence shows that these goals were met to some degree by the tax cut. Unemployment fell from 5.2% in 1964 to 4.5% in 1965, and fell to 3.8% in 1966. Initial estimates predicted a loss of revenue as a result of the tax cuts, however, tax revenue increased in 1964 and 1965.
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