When Ronald Reagan signed the Tax Reform Act of 1986 into law, he called it “the best anti-poverty measure, the best pro-family measure, and the best job-creation measure ever to come out of the Congress of the United States.” At its heart, the 1986 law was a bold simplification of a bloated tax code. It lowered rates, broadened the base, and tried to make the system fairer. Nearly 40 years later, Congress is once again in the middle of rewriting the rules – and the stakes are just as high.
To understand where we’re going, it helps to look back even further. For most of U.S. history, the federal government relied on tariffs – taxes on imported goods – as its main source of revenue. But that changed dramatically during the early 20th century. After the ratification of the 16th Amendment in 1913, the federal income tax became a permanent fixture. Still, it was the Great Depression that reshaped federal taxation. The Revenue Act of 1932, passed under President Hoover and expanded by FDR, introduced new excise taxes, raised income tax rates, and expanded the federal role in economic stabilization.
By the end of World War II, the income tax had transformed from a narrow levy on the wealthy into a mass tax paid by millions. Payroll taxes were also introduced to fund Social Security, further embedding the federal government in the day-to-day financial lives of Americans. In contrast to the tariff-driven model of the 19th century, the modern U.S. tax system has evolved to focus primarily on income, payroll, and corporate taxes – a reflection of our transition from an industrial to a consumer-driven economy.
The 2025 tax bill, informally nicknamed the “Big Beautiful Bill,” is the latest milestone in this ongoing evolution. It represents the most ambitious attempt at tax reform since the Trump-era Tax Cuts and Jobs Act (TCJA) in 2017. While the TCJA brought temporary relief to many individuals and business owners, most of its provisions are set to expire at the end of 2025. This new bill aims to make many of those changes permanent – and in some cases, even more generous.
One of the most significant provisions in the new bill is an expansion of the standard deduction. Originally doubled by the TCJA, this deduction will now increase further, providing added relief to middle-income families. At the same time, lawmakers are proposing to extend the $2,000 Child Tax Credit through 2028, with a temporary $500 boost per child. These changes signal continued emphasis on family-oriented tax relief, a theme that dates back to the 1940s when Congress introduced the first income tax withholding and family allowances to stabilize household budgets during wartime.
Small business owners and entrepreneurs also have a lot at stake. The popular 20% pass-through income deduction is not only being made permanent, but is also getting a slight bump to 23%, while easing some of the income phase-outs that previously limited access. In 2024, the U.S. hit a record number of new business applications, and lawmakers seem to be embracing this shift in the workforce with more favorable tax treatment.
The bill also proposes to lower the corporate tax rate from 21% to 15%, a move reminiscent of Reagan’s 1986 strategy of incentivizing corporate investment and growth. But unlike Reagan’s era – when America faced stiff competition from Japan and Western Europe – today’s tax policy is shaped by global capital flows, digital markets, and the push for reshoring industries.
Estate planning is another area that will see major changes. The estate tax exemption, which was scheduled to drop sharply in 2026, will now be reset to $15 million per individual and adjusted for inflation thereafter. This gives high-net-worth families a clearer planning window and more certainty about long-term wealth transfer strategies.
Less noticed, but equally important, is the adjustment to the Alternative Minimum Tax (AMT). Originally designed in 1969 to ensure that wealthy taxpayers couldn’t completely avoid paying taxes, the AMT had gradually become a burden on middle-income earners until recent reforms scaled it back. The new bill continues that effort by increasing exemption amounts and widening the phaseout thresholds.
While the bill aims to stimulate economic growth, some economists argue that the benefits may not justify the costs. The projected long-term GDP growth is modest, and the substantial increase in debt could have adverse effects on the economy. Of course, the impact remains to be seen, if the bill is passed.
So, what does all this mean for taxpayers today?
It means we’re entering another pivotal moment in American tax history – one that blends modern political priorities with long-standing policy philosophies. At LeConte Wealth, we think about tax policy not just in terms of rules and rates, but as part of a broader plan for building purpose. That’s why our Purpose-Built Planning™ process weaves tax strategy into every stage of a client’s financial journey – from income optimization and investment tax efficiency to legacy planning and business transitions.
If there’s one lesson to draw from history, it’s that tax laws will always change – but your values and goals should remain the foundation. We help clients navigate new legislation not with panic or knee-jerk reactions, but with clarity, perspective, and a steady hand.
As with any major reform, the final version of the 2025 tax bill will likely evolve as it works its way through Congress. But now is the time to review your financial plan, re-evaluate key tax strategies, and prepare for what’s ahead. History favors the prepared – and in times of change, purposeful planning matters more than ever.
