A Brief History of Tax Reform in American Government

As president of West Liberty University in Wheeling, West Virginia, from 2007 until 2015, Robin Capehart presided over one of the oldest and most prestigious schools in the region. Today, he serves as a senior fellow with the Public Policy Foundation of West Virginia. In this position, Robin Capehart also uses his extensive experience as a government advisor on tax reform to conduct research and author papers on issues of importance to the economic and social well-being of the state and the nation.

Tax reform in the United States has a lengthy and complex history. For almost a century after its founding, the country funded its operations largely through tariffs, only establishing a limited income tax during the Lincoln administration. Just seven years after the Civil War concluded, Congress rescinded that tax.

Thinking on the issue changed in 1913, when legislation permitted the imposition of a new federal income tax. Tax rates burgeoned during World War I, with the very top rate hovering in the 90 percent range until John F. Kennedy pushed through a significant tax cut. Since then, presidents have initiated major tax cuts about once in a generation.

Major successes in tax reform include a report by William Simon, treasury secretary under President Gerald Ford. The Department of the Treasury’s 1977 Blueprints for Basic Tax Reform had long-lasting policy effects.

The Reagan administration achieved a high point in tax reform in the 1980s, when it not only slashed taxes, but also anchored reform in a thoroughgoing simplification and consolidation of the tax code.

West Virginia Tax Reform - Excess Acreage Tax

The past president of West Liberty University, Robin Capehart served as chairman of the West Virginia Governor’s Commission on Fair Taxation from 1997 to 2000. As the commission’s chairman, Robin Capehart coauthored a 1999 study of West Virginia’s tax structure. The nearly 1,000-page report determined that the state’s tax system was burdened by an overly complicated and regressive structure that was still geared to an early-20th-century economy.

The Excess Acreage Tax is one of many specific examples outlined in the report of outdated tax measures that do not fit the economy and society of West Virginia today. Established in 1905, the Excess Acreage Tax imposes a one-time tax of $0.05 per acre on any corporation purchasing 10,000 acres or more of property in West Virginia. However, this does little to address the state’s historic economic problem of high rates of absentee land and mineral ownership. In 2012, West Virginia’s top 25 landowners owned about 18 percent of private land in the state, but none of the 10 largest owners had their headquarters in West Virginia.

The commission’s report recommended several changes to modernize the Excess Acreage Tax to reflect today's economic and fiscal situation . These recommendations included increasing the tax from $0.05 per acre to $0.50 per acre, lowering the property size threshold to 1,000 acres, making the tax annual rather than a one-time measure, and allowing taxed corporations to claim a credit against West Virginia’s severance tax. Based on data from the West Virginia Property Tax Department, adopting these changes could generate an estimated $1.7 million in annual tax revenue.

A Need for Comprehensive West Virginia Tax Reform

Formerly the president of West Liberty University, Robin Capehart oversaw a wide range of activities that significantly boosted enrollment and got the community more involved in campus life. Robin Capehart’s experience beyond leading West Liberty University includes a past role as West Virginia’s Secretary of Tax and Revenue, and he has focused on enacting comprehensive tax reform.

In a 2015 interview, Mr. Capehart spoke of the present tax system having its roots in the 19th century and the Great Depression and not reflecting the dynamics of the current economy. As he saw it, the need to broaden the state’s tax base and take a comprehensive look at the entire tax structure rather than simply tinker around the edges is particularly acute.

Unfortunately, taking aim at a single issue such as the corporate net income tax can have unforeseen consequences on other aspects of the tax system. There have already been limited efforts to modernize the tax system, with Senator Joe Manchin taking on recommendations and addressing the regressive aspects of taxes, such as a need for greater personal income tax exemptions in a way that reflects federal poverty levels. The present reforms centered on ensuring that local control was greater, particularly with regard to activities of the Municipal Home Rule Board, and in addressing the business tax structure.