History of the American Income Tax

[Updates below.]

News8Austin has the report. They've been doing several reports on the IRS and income taxes over the last week or so. Some noteworthy quotes:

Oct. 3, 1913, is another day that will live in infamy.

The Underwood Simmons Tariff Act created the income tax as we know it today, enabled by the earlier ratification of the 16th Amendment.

And the Form 1040 that first year was four pages, taxing one percent of income between $20,000 and $50,000, graduated up to six percent for those making $500,000 or more in those days.

Deductions were simpler 90 years ago for such things as interest paid, state and local taxes, losses in business, or arising from fires, storms or shipwreck.

The personal exemption back then was set at $3,000, meaning most Americans didn't have to pay anything.

According to the Tax History Project, only two percent of American households had to pay income tax in its early years.

[...]

President Abraham Lincoln, one of our most beloved Americans, signed into law a measure aimed at raising revenues to help pay for the union's expenses in the Civil War.

That same measure in 1862 created a Commissioner of Internal Revenue and the nation's first income tax.

The Internal Revenue Service came to be in 1894, as the income tax was revived after a 22-year absence.

The Supreme Court would intervene ruling the tax unconstitutional just one year later.

The modern income tax has its roots in the administration of Democrat Woodrow Wilson. In October 1913, he signed into law the Underwood Tariff Act. Since then, the growing complexity of law tax has financed more than just a few legal and accounting careers, as well as the government workers required to administer and enforce it.

It wasn't until 1943 that the Congress passed the Current Tax Payment Act that required employers to withhold taxes from their workers' wages and forward the payments on to the government once a quarter.

Copyright ©2004TWEAN News Channel of Austin, L.P. d.b.a. News 8 Austin

Meanwhile, Austin-American Statesman's Lasso has a report on the forces behind Texas tax changes:

HOW ARE TAXES RAISED IN TEXAS?: If history is a guide, the state raises more money for public goods (roads, schools, cops) when the business establishment says it's time. The last major change in Texas taxes came in 1961, when the Legislature passed the first state sales tax. The sales tax had the backing, first, of the business interests in Dallas.

So, when Lasso reads today [beware of link rot] that two major Dallas business groups favor increasing funds for public schools, it means something might, just might, happen.

The Greater Dallas Chamber of Commerce said Wednesday it would support both a decrease in the property tax collected for schools and an increase in spending on students. The Chamber said property taxes should drop by 50 percent to 75 percent. Another business group, the Dallas Citizens Council, supports the Chamber's proposal.

Copyright 2001-2004 Cox Texas Newspapers, L.P. All rights reserved.

Taxes should drop and schools should be adequately funded. But that funding shouldn't be done through the state.

UPDATE(4/15/2004 2:55pm)
It's Income Tax Day. Read it and weep.

Posted by Drizzten at March 04, 2004 05:18 PM