The Reagans meeting with then-President Richar...

The Reagans meeting with then-President Richard Nixon and First Lady Pat Nixon in July 1970 (Photo credit: Wikipedia)

Surtax: a temporary tax on top of another tax. If your effective tax rate is 10%, and a 10% surtax is added to it, your effective tax rate is really 11%. If your effective tax rate is 30% and a 10% surtax is added to it, your effective rate is really 33%.

To help pay for the Vietnam war, LBJ had a 10% surtax enacted in 1968 on top of the Federal income tax. Since it only applied to 9 months of 1968, the actual tax rate was 7.5%. Congress renewed the temporary surtax for 1969 and the first half of 1970 at the reduced rate of 5%, and then let it expire. During Ronald Reagan’s governorship, temporary increases to the sales tax were enacted to help pay for flood damage in Northern California. Some say that there is no such thing as a temporary tax, but both LBJ and Reagan promised that the taxes were only temporary and both kept their word.

My first ever letter to a president was sent to Richard Nixon favoring an additional surtax to combat inflation of 2% in 1971. Someone in the Treasury Department responded with the word that a different solution had been selected. Nixon announced a wage-price freeze that ultimately did not work. I supported the surtax to protect people on fixed incomes from inflation. Inflation is a tax that affects everyone, while a surtax only affects those paying an income tax.

Once the fiscal cliff is behind us and we have enacted tax reform, I think that we should keep an income tax surtax in reserve for future emergencies. In times of war, natural disasters like Katrina and Sandy, or recession, we could enact a temporary surtax to provide revenue to pay for unusual expenses.