A Short Timeline of Taxation of the United States, Part Two

W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

1861 – After Lincoln was put in office, the South walks out on Congress and form the Confederate States of America with a new constitution to keep the new government power to tax in check.

1862 – The first US income taxes is levied to help finance the rising massive costs of the Civil War. If you’re feeling the pressure with today’s taxes, call a CPA for Tax Preparation in Raleigh, NC for all your tax-related needs!

1872 – The income tax is abolished.

1894 – Congress passes an income tax as a result of complaints that large reliance on tariffs pushes up the costs of imports for farmers and consumers. Go here if you want help from a modern-day CPA firm in Raleigh, NC.

1895 – The US Supreme Court susta‌ins the idea that the 1894 income tax law is in direct conflict with the US Constitution’s bars on levying direct tax.

1913 – Ratification of the sixteenth Amendment removes that bar and Congress creates an income tax system.

1917 – World War I revenue requirements bump up taxes, with the largest rate jumping to 77% in 1918.

1924 – Publicating the names of taxpayers and the amount of taxes they owe fails to complete the goal of enforcing payments and the practice is dropped.

1942 – Before World War II, the income threshold for filing income tax excluded most wage earners. But the cost of the war bumped the threshold down the income ladder and sent the top rate to 94% prior to the war being over.

1943 – In order to enforce compliance from the sharply increased number of taxpayers, Congress institutes tax withholding from wages, which basically turned employers into tax collectors.

In the 1940s Justice Jackson of the Supreme Court, former chief counsel to the IRS, boasted about how honest Americans were in reporting their income taxes. The system was based on the user’s honesty – there were only a few informative returns. Open resistors to the taxes were few and the underground economy was relatively small.

1962 – IRS Commissioner Caplin said “no other nation in the world has ever equaled this record of voluntary compliance. It is a tribute to our people, their tradition of honesty, and their high sense of responsibility in supporting our government.”

1982 – Chief Justice Neely said – “cheating on federal and state income tax is all pervasive in all classes of society; except among the compulsively honest, cheating usually occurs in direct proportion to opportunity.”

Stay tuned for Part 3 of the Timeline of US Tax Policy!

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