Entrepreneur & Author
Tax Day in the United States!
“Let me tell you how it will be
There’s one for you, nineteen for me
‘Cause I’m the taxman, yeah, I’m the taxman
Should five percent appear too small
Be thankful I don’t take it all
‘Cause I’m the taxman, yeah I’m the taxman
– The Beatles “Taxman”
——-
Next Tuesday is Tax Day in the United States which is always an inauspicious date. Every April 15th, millions of otherwise upbeat and proactive citizens wait to the very last minute before submitting to inevitable long arm of the taxman. Entire cottage industries of tax attorneys and Certified Public Accountants owe their very existence to this date.
“The income tax has made more liars out of Americans than golf.”
– Will Rogers
Concepts of income tax have been changing in the United States, as elsewhere, for hundreds of years. “President Lincoln established the Bureau of Internal Revenue in 1862, the direct predecessor of today’s IRS. Originally, those considered wealthy, with incomes above $10,000 were taxed at a 5% rate while 3% were the standard for incomes above $600. Individuals earning under $600 a year were exempt. Tax collectors were paid a commission of 4% on all money collected up to $100,000 and 2% above that level. These actions lead to widespread abuse and corruption. By 1863, the Bureau of Internal Revenue was firmly entrenched as a strong arm of the Central American government, employing an army of four thousand. Only three years later, however, Congress appointed a Special Revenue Commission charged with reforming the scandal-ridden bureau. In 1872, the income tax was repealed.”[1]
”The hardest thing in the world to understand is the income tax.”
– Albert Einstein
Politicians and the public have long struggled with the idea of income tax and what is a fair amount to pay the government to maintain services. Income tax in the United States would not reappear, in earnest until the early twentieth century. “Income tax was seen as being the most efficient means to keep capitalists and monopolists from amassing huge fortunes. Theodore Roosevelt denounced such wealth in 1906 as fortunes swollen beyond all healthy limits.”[2]
Prior to that, the United States Supreme Court issued an exceptionally noteworthy ruling in 1895. The court ruled on a suit brought about by wealthy tax protesters; their claim was that income tax was unconstitutional, as it was not proportioned among all citizens. In other words, a direct tax on the people would have to be equal. This political positioning went back and forth until October 3, 1913, when President Woodrow Wilson signed into law the first personal income tax since the Civil War. Our current income tax can be directly traced to this legislation. Surprisingly, however, the tax law passed at that time was only fourteen pages long, in comparison to the almost incomprehensible code that stands today.
At least tax season 2025 in the US is almost over! I hope you enjoy this week’s issue.
[1]Shelley L. Davis, “Unbridled Power” p.190
[2]Ibid., p.192
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