There is another thread out there about the history of taxation. But let’s narrow it down - what about the history of income tax, in the modern sense? I seem to remember that the British goverment, possibly in Georgian times, introduced it to help pay for the war against France. I have another hazy memory of it being introduced during World War I to help pay for the war effort and being kept around afterwards to help pay for age pensions, unemployment benefits etc.
The first U.S. Income Tax law was passed in 1862 to help fund the Civil War.
The first income tax in the US started in 1862, as BobT mentioned. It was ended in 1872. It was brought back in 1894, but a year later was found to be unconstitutional by the Supreme Court. In 1913, the 16th amendment was passed, authorizing Congress to create an income tax.
The article I linked to came from one of those “abolish tax” sites, but hasn’t said anything not already stated.
This site gives a good/brief overview of taxes, but starts in 1913.
It’s pretty much the same thing as BobT’s, but why not?
There was an income tax in Britain to fund the Napoleanic wars, but I believe it was repealed after those wars came to an end.
In Canada, some provinces passed income taxes in the late 19th century, but the first federal income tax was passed during WWI to finance the war - around 1917, I think, but I’m not sure.
Don’t know about the situation in Australia.
Here’s a history of taxation in Australia.
http://www.ato.gov.au/corporate/content.asp?doc=/content/tax_history.htm
I recently looked up American History of Income tax. A liberal radio station, KPFA, (which is so far to the left that they think NPR stands for National Petroleum Radio or National Pentagon Radio!) was calling for a change in the income tax laws to remove the home interest payment deduction.
That got me to thinking about the home interest payment deduction. As it stands now, you are allowed to not pay taxes on any money you earn that is used to pay off interest on your home mortgage. I started thinking that for our house, that is a big chunk of change. Why don’t I have to pay taxes on my mortgage interest? When did that deduction occur?
With those questions in mind, I went to the library to find out about income tax and when that deduction came into being and why. I had to contact the library of congress to find the text of the Underwood Simmons Tariff Bill of 1913, signed by Wilson, that enacted the income tax that we know today.
Previous to that bill the American government paid for everything from private donations and money collected by tariffs on trade goods (with the exception noted above to help pay for WW I). The government needed more money. To avoid raising tariffs (again), the Underwood Simmons Tariff Act lowered tariffs, and made up for the difference with an income tax. Everyone was taxed at 1%, regressively, and then there was a progressive percentage as well, from 1% to 6% based on taxable income, so the actual income tax was 2% to 7%.
The text of the document, which I had to photo copy out of a large tomb of American Statutes, did allow for many deductions, any interest payments, many misc. expenses, and personal deductions. The text did not say why, but my interpretation is that the intent was to make as light a touch as possible on the individual. Taxes were only assessed on the ‘left over’ money, after all the bills were paid. Almost as if they are saying, “so sorry, but we are going to need to take a bit of your disposable income to run the country.”
The interesting thing is that for every year there has been an income tax, there are changes to the laws. They started it in 1913 and have made a change every friggin year! As one senator said, “I find a loop hole in the law, I pass a law to plug that hole, then they pass a law to drill through the plug…”
IMHO,ICBW: What is going on today, with taxes on ciggarettes, alcohol, gasoline, and other products, is that the tax system has become regressive. Poor people, who weren’t supposed to have to pay taxes in the first place, end up paying more taxes cause they can’t get away from those regressive taxes.
So why did you want to know anyway?
Because they drink, smoke and drive '76 Camaros more than rich people?
Uh, no, cause if they use any at all, since there are more non-rich people, all the non-rich end up paying more than the rich. It doesn’t matter how much money a person makes, everyone pays the same taxes on cigs, smokes, sales tax, gas, etc, etc.
For a rich person, it’s a small percentage of their income.
For a non-rich person, it’s a larger percentage of their income, therefore a larger burden, even though it’s the same amount.
For example, let’s take gas in California. You drive 12,500 miles a year at 20mpg for around 625 gallons of gas/year. There is a Federal Tax, State Tax, and Sales Tax on each gallon that you pay no matter how much you make. Figure total tax per gallon is around $0.55 give or take depending on price and sales tax. So everyone pays around $344/year in gas tax.
Let’s say you make 150k/year, 344 isn’t much. Now say you make 20k/year, that starts to hurt, but you still can get buy.
Now suppose that there are 1000 people makeing 150k to 10,000 people making 20k. Who pays more in taxes? The 10,000 end up paying $3.4 million, while the 1000 only pay $344,000. So the 20k people end up paying more in gas tax than the 150k people, which is not what, IMHO, is desired for a viable tax plan.
Obviously my example numbers are extremely simplified, but it’s just for an example for Chairman Pow.
And before you freak out that rich people aren’t paying enough in taxes, understand that this is all about regressive taxes, not progressive taxes, where rich people pay more, a great deal more.
Like so much of U.S. tax law, the home mortgage interest deduction is designed to implement policy through tax law. Congress decided that encouraging home ownership would be a good thing to encourage, so they decided that they would permit homeowners to deduct some or all of their mortgage interest.
It actually has been a very successful program. One of the reasons I bought my apartment rather than continuing to rent is that the tax deductions on the interest and real estate tax I was paying would significantly reduce my cost of ownership.
By the way, you can’t deduct all home interest. There is a $1 million cap on the mortage that you can deduct interest for, with a sub-cap of $100,000 for the amount that you can be for other than home purchase price (with other details that I won’t summarize here).
Do you have a cite for that?
Thanks, mate.
Why didn’t I start at the Tax Office’s website?
I find a couple of bits of info in it interesting;
I see no info about these taxes being removed after the original purpose for raising them had been satisified. Maybe I’m just a cynic :rolleyes: