100th Birthday of US Federal Income Tax
The first known written record of taxes dates back to ancient Egypt when grain,
livestock or oils were used instead of money to pay what was owed to the
government. Even then, the surviving hieroglyphic tablets records how people
complained about high taxes. Some things never change.
This year on February 3, 2013 is the 100th birthday of the 16th amendment
which is the recognized birth of US Federal Income Tax. The history of the 16th
amendment actually dates back to 1861 during the civil war, when Congress
passed the Revenue act of 1861. This act included a 3% tax on personal
incomes over $800 to help pay war expenses. Ten years later, in 1872, this act
was repealed. The idea stuck around though, and in 1894 Congress enacted a
4% tax on income over $4,000. The U.S. Supreme court immediately struck this
down in a 5-4 decision. In 1909, Congress tried again with the idea of an income
tax. This time, however, it stuck and on February 3, 1913 the 16th amendment
was ratified stating "The Congress shall have power to lay and collect taxes on
incomes, from whatever source derived, without apportionment among the
several States, and without regard to any census or enumeration."
In 1913 the first Form 1040 was documented. Congress placed a 1% tax on net
personal income over $3,000, and 6% surtax on any income greater than
$20,000. The first year no taxes were collected; the IRS only checked the forms
for accuracy. During World War I the income tax rose to its highest point at 77%
to help finance the war. Improvements to the system were made during World
War II when congress introduced payroll withholding and quarterly tax payments.
The alternative minimum tax (AMT) is another type of federal income tax that
was enacted in 1969. This tax was established so that any taxpayer who wasn't
paying their fair share due to deductions and credits would still have to pay an
income tax.
The deadline for filing taxes wasn't always April 15th. When the 16th amendment
was first enacted the deadline was March 1st. In 1918 that date was pushed
back to March 15th, then to April 15th in 1955.
Today, the IRS collects more than $1.2 billion in taxes and processes more than
133 million returns annually. And of course, people still complain about high
taxes.
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