A History Of Income Tax
It’s tax season again and everybody is hurrying to make the deadline set up by the IRS. For most working people, taxes are taken out of their pay. If they meet the criteria with their tax rate, they don’t owe anymore taxes and probably overpaid and will receive a refund. For others, like the self-employed or the rich, they may owe taxes. Whatever the outcome, you had best have your taxes done or have filed an extension with the IRS or the corporate boogeymen will surely get you. Here’s a short history of income tax and why we pay them today...
WHERE IT ALL BEGAN
You can blame the Chinese for the idea of the Income Tax. They started the notion in the year 10 CE with Emperor Wang Mang of the Xin Dynasty. It was a 10% tax on all professionals and skilled labor. Not surprising, Wang Mang was overthrown in an uprising just 13 years later. There is no report of whether it was over the income tax.
TAXES COME TO ENGLAND
The first recorded income tax in England was issued by Henry II during the Third Crusade to help pay for the war. This, too, was a 10% tax on income and property. It went away after the war and wasn’t picked up again until another war - the Napoleonic War - in 1799. That means that England fought the American Revolution out of its own coffers without taxing the people.
AMERICAN HISTORY OF INCOME TAX
The United States didn’t have an income tax until the Civil War. It was called The Revenue Act of 1861 and was at a rate of 3% on income over $800 (which is approximately $20,750 in today’s exchange dollars). It was later changed by Democrats in 1894 to be a rate of 2% on incomes of over $4000 ($107,500 in todays dollars). In other words, it was a tax on the rich. Less than 10% of all households were required to pay taxes.
ARE TAXES UNCONSTITUTIONAL?
They aren't today, but they were in 1895. The Supreme Court, in its ruling of Pollock v. Farmers’ Loan & Trust Company said that you couldn’t tax property use. This made taxing income difficult, too. The whole thing was considered unconstitutional and taxes went away for a short time period. A very short time period...
SO WHY DO WE PAY TAXES TODAY?
In 1913, taxes returned with the 16th Amendment. This allowed Congress to levy an income tax without apportioning it to the states or basing it upon Census results. It exempted income taxes from constitutional requirements regarding direct taxes which was the change in 1895. We were all required to start paying our dues on April 15th. Income taxes are currently the lowest they have been since the 1950s, where taxes reached more than 90% (before deductions). However, at the time of high taxes, America was in the process of building an interstate highway system, a space program, a strong military, and our educational system was the best in the world. The lower our taxes drop, the lower our taxes drop, the lower our worldwide standing goes. Coincidence?
