How come we have to pay all these taxes?
We know that you ask yourself this question every year – or, hopefully, every quarter.
So here are some answers.
For the next few posts, we’ll be focusing on some key moments of IRS history – the story behind all those taxes you have to pay.
Up first: 1862.
Fact #1: This whole thing got started because President Lincoln didn’t have enough money to pay for the Civil War. It’s true! The nation’s first income tax was based on a sliding scale: people who made $600-$10,000 a year had to pay 3% of their incomes, while the rich people (those who made over $10,000!) had to pay 5%.
Those were simpler times.
After the war was over, no one wanted to pay an income tax any more. Congress cut the income tax rate in 1867, and abolished income tax altogether in 1872.
But by then, the government was used to having that extra spending money, so they had to tax something.
Fact #2: From 1868 until 1913, 90% of tax revenue came from “sin taxes” – extra taxes people had to pay on alcohol and tobacco.
We still pay sin taxes, actually. But of course that’s on top of everything else.
Fact #3: In 1894, the income tax came back, thanks to something called the Wilson Tariff Act.
After that, there was a lot of back-and-forth over whether the income tax was constitutional or not.
- 1895: Unconstitutional!
- 1909: Constitutional! (At least, President Taft thought so.)
- Then, in 1913, a watershed moment: Wyoming became the final state to ratify the 16th Amendment, which made the income tax constitutional once and for all.
Fact #4: In 1913, the very first Form 1040 was introduced.
It’s been downhill ever since.
Stay tuned for the next…. exciting…. installment of the story of taxes. And of course, if you have any questions give us a call at 844-841-9857, or schedule a free consultation here.