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.
As a business owner, you know everything there is to know about your industry. You could be an expert on your specific business, but how much do you know about business taxes? If you are like other business owners, you might not know a lot. Luckily, there are professionals who can guide you through the basic and specific tax...
If your loved one recently passed away, you may have many questions about filing income tax for them. Perhaps the most important thing is to understand that you are not alone. Dealing with a deceased’s unpaid taxes can be challenging. For example, who is responsible for paying taxes when someone dies? Do IRS debts go...
If you have a tax balance with the IRS, you may be wondering if you can get a passport. While having your passport renewal denied or revoked is a possibility, it depends on the amount you owe the IRS. If your taxes become seriously delinquent, the IRS can take action against you, leading to the...
Most employers in the United States completely shut down or suspended operations during the COVID-19 pandemic. To help such businesses, the federal government implemented various policies, including the Employee Retention Tax Credit (ERTC) or Employee Retention Credit (ERC) program. However, it can take the IRS months to process claims because of the number of applications the...
If you’re a small business owner, you’ve probably heard about sales tax. Knowing how to collect, record and remit sales tax can be complicated, especially as your business grows. Keeping up with changing tax regulations can also be challenging. Paying sales tax for your small business is essential because failing to do so can result...
The Employee Retention Credit (ERC), also known as the Employee Retention Tax Credit (ERTC), will unveil some major changes at the start of 2024. Starting in September of 2023, the IRS Commissioner placed a moratorium on new ERC applications through the end of the year, giving the IRS time to update its guidelines and develop a new...