History of Taxation

There has never been a time in American history that our tax code has been so complex. We are suffering from almost 100 years of tax legislation and changes.

History reveals that "politicians have changed the tax code 31 times in 41 years." (National Taxpayers Union newsletter 4/96)

Shirley Paterson, past IRS Commissioner (1989-1992) says, "The current income tax system is an unwieldy, inefficient, ungodly mess. . ." (National Taxpayers Union newsletter 4/96)

Our present tax code has more than 600 forms. (Heritage Foundation Newsletter 5/96)

Jack Kemp say, "Our nation’s capital has become occupied by armies of accountants, tax specialists, and lobbyists seeking to curry favor in exchange for loopholes and deductions." (The Flat Tax, Heritage Foundation, 1996, p.3)

There are 12,609 special interest groups officially registered to lobby in Washington . . . each one lobbying for the tax code to favor their group. (Heritage Foundation Newsletter 5/96)

Most Americans worked until May 9th, just to earn enough income to pay their federal, state, and local taxes. Each year it is taking longer to earn enough money just to pay our taxes. (1996 Information Please, p.47)

How did we get to where we are today? To answer that question, let me give you a brief summary of taxation in America.

The History of Taxation in America

1791 Our first tax was basically a consumption tax only on distilled spirits, refined sugar, tobacco, snuff, carriages, and all property sold at auctions.

1862 This year the first real income tax legislation was passes. It was very similar to our present graduated tax code.

1862 The Act of 1862 created the Officer of Commissioner of Internal Revenue. (The IRS has been in operation for over 100 years.) This newly created office was given the powers to collect tax and seize of property for lack of payment of taxes.

1895 The U.S. Supreme Court ruled income tax was unconstitutional! According to the ruling, income was not being apportioned among the states according to the constitution.

1913 The 16th Amendment to the Constitution gave the federal government the power to levy an income tax ad was ratified by the states on February 3, 1913. The 16th Amendment reads as follows: "The Congress has have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

1913 Tax code was comprised of only 14 pages of federal law. Married couples were required to file separate income tax returns.

1943 Employers were required to being "withholding tax" on wages.

1948 Married couples were required to file joint returns (with separate rate schedules) -- "income-splitting" provided a tax advantage.

1951 Head of Household tax status was created to give tax relief to single taxpayers with children.

1954 The tax code had grown to 984 pages.

1962 John F. Kennedy, in a speech he gave in 1962 said, "An economy hampered by restrictive tax rates will never produce enough revenues to balance our budget, just as it will never produce enough jobs or enough profits. In short, it is a paradoxical truth that tax rates are too high today, and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut the rates now."  (Financial Planning, March 1996, p. 31)

1969 The tax code was changed and resulted in married couples actually being financially penalized for filing joint returns, compared to what singles would owe if filed separately. This was an historic moment in tax history.

1975 The earned income tax credit was passed to give low income workers a tax break.

1981 Married couples with dual incomes were granted a tax deduction -- a deduction of 10% (up to $3,000) was given to the spouse earning the lower income.

1985 The tax code is now 3,975 pages.

1986 The Tax Reform Act of 1986 was signed into law. However, this reform did very little to simplify the tax code. (But, we did move to only two tax brackets: 15% and 28%)

1992 The "simplified" tax code is now 9,400 pages in length. (Dollars and Sense Newsletter, March 1993)

1993 Since World War II, for every dollar in new taxes, Congress has found a way to spend $1.59. Hence the $4 trillion - plus federal debt.   (Letter from Jesse Helms, March 16, 1993)

1993 Our tax code has five brackets: 15%, 28%, 31%, 36%, and 39.6%

1994 Only 19% of the American people have faith and trust in our government, compared to 76% back in 1964.

1996 Intense debate begins over current tax system and need for simplification -- much discussion doing away with the old system and using a flat tax or national sales tax.

1997 New tax reforms make over 1,000 changes to present tax code and makes it even more confusing for average American. New regulations are given for IRA’s, Estate taxes, capital gains, and home sales, etc.

©2000 Ethan Pope