W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…
1861 - After Lincoln was elected, the South walks out on Congress and form the Confederate States of America with a rewritten constitution to keep the newly formed country’s power to tax in check.
1862 - The beginning of US income tax is instituted to assist the financing of the rising massive debts 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 in response to complaints that large reliance on tariffs skyrockets the price of imported goods 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 insituting direct tax.
1913 - The sixteenth Amendment is passed and takes that bar away and Congress creates an income tax system.
1917 - World War I financial needs bump up taxes, with the largest rate reaching 77% in 1918.
1924 - Publication of the names of taxpayers and the amount of taxes they owe fails to achieve the goal of forcing payments and the practice is dropped.
1942 - Before World War II, the income threshold for filing income tax left most working people out. However, 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, effectively turning employers into tax collectors.
In the 1940s Justice Jackson of the Supreme Court, former chief counsel of IRS, gloated about how honest Americans were in turning in their income taxes. The system was based on the user’s honesty - there were very few informational returns. Tax resisters were few and the underground economy was relatively small.
1962 - IRS Commissioner Caplin stated “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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