W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…
1861 – After Lincoln’s election, the South walks out on Congress and form the Confederate States of America with a rewritten constitution to keep the new government power to tax in check.
1862 – The first US income tax 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 gets struck down.
1894 – Congress creates an income tax as a result of complaints that excessive reliance on tariffs skyrockets the price 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 holds 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 establishes an income tax system.
1917 – World War I revenue requirements push up tax rates, with the largest rate jumping to 77% in 1918.
1924 – Publicating the names of taxpayers and how much they owe fails to achieve the goal of enforcing paying the taxes and the practice ends.
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 force 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 to the 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 informative returns. Open resistors to the taxes were few and the black market 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!
http://www.marccpa.com/
W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…
So, what went wrong with the tax system in the US?
US tax makers have been reaping what they have been sowing for quite a while. The honor system has been replaced by a system in which every tax payer is under surveillance because of the strong threat of evading their taxes. In other words, consent has been replaced with compulsion. Honor has been replaced with espionage. If you’re feeling the pressure with today’s taxes, call a Cary NC CPA for all your tax-related needs!
In the 1950s, there wasn’t a bank in the US that told the IRS about the affairs of citizens who went to that bank, interest was not reported, withdrawals of money weren’t reported, and nothing that went through accounts were photographed. In addition to this, real estate transactions weren’t reported, stock transactions were not reported, dividends were not reported, income from other sources (Form 1099) was not reported, and US Customs did not require a declaration of the amount of money carried. Go here if you want help from a modern-day Tax Preparation in Cary, NC.
Before it was espionage, it was an honor system, and it worked. The erosion that occurred over the previous fifty years to now is that anything of any fiscal significance is now reported.
Adam Smith said that taxes will be evaded and tax laws shown no credence when there is a general suspicion of a lot of meaningless expense and a lot of misspending of tax revenue. For example, $500 toliet seats, huge grants to study the sex lives of ants, etc.
Because the government wanted to catch a handful of tax resisters and evaders in the 1950s Congress created a tax abomination of the US tax system that more and more taxpayers attempt to bypass. As a general rule, mass tax evasion is a clear signal that a government’s tax system isn’t working. Citizens will pay taxes, even income taxes, if the rates are acceptable.
Thanks for reading! Stay tuned for more updates!
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