So Congress came up with the Tax Reform Act of 1976
to fix the problem.
"The conference report also tightens up the
minimum income tax provisions substantially, to insure that wealthy individuals
will not be able to use tax shelters to get out of paying income taxes
entirely." -Rep. Christopher J. Dodd, (D) Connecticut
"...actions taken by the conferees will assure
that all taxpayers pay a reasonable amount of taxes as a result of curbing tax
shelter devices and expanding the minimum tax." -Sen. Paul J. Fannin, (R)
Arizona
"This bill raises the minimum tax paid by
high-income persons and eliminates or restricts many tax shelters. These
actions are consistent with my firm support of measures designed to close the loopholes and
ensure that each taxpayer bears his or her fair share of the
overall tax burden." President Gerald R. Ford, signing the bill into law,
October 4, 1976.
In December of that year, the Joint Committee on
Taxation issued this statement: "The minimum tax was enacted in the Tax
Reform Act of 1969 in order to make sure that at least some minimum tax was
paid on tax preference items, especially in the case of high-income persons who
were not paying their fair share of taxes. However, the previous minimum tax did not
adequately accomplish these goals, so the [1976] Act contains a substantial
revision of the minimum tax for individuals to achieve this objective."
And it's a good thing they put in all that rhetoric
and work, because by 1986 there were 659 high-income persons who paid no
income tax - a 170 percent increase from 1974, and a 325 percent increase from
1969. Were it not for the highly effective Tax Reform Act of 1976, who knows
how much higher those numbers might be, right?
(Source: America: Who Really Pays the Taxes?,
by Barlett and Steele, 1994)
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