Income Tax Season
The tax season for most all individual tax payers falls during
January, February, and March each year. It's the time of year
that most citizens look forward to receiving a refund or they
dread because they know a balance due must be paid by April
15th. But do you know how all that came to be? Let's have a
short lesson in the history of the income tax and tax season in
the United States.
In the beginning, from 1791 to 1802 the US had no individual
income tax system. The country and its government were supported
by internal taxes on alcohol, transportation, sugar, tobacco,
and slaves. But, thanks to the War or 1812, the first sales tax
was implemented for purchases of gold, silver and silverware,
jewelry, and watches. Then, in 1862, when the Civil War came
along, the first formal system for individual taxes was
implemented, and we've been taxed since. Additional sales,
excise, and inheritance taxes were also made a part of our tax
system, and thus the individual began to pay, and pay, and pay.
But that's not the end of the story.
The income tax law of 1862 established the office of
Commissioner of Internal Revenue. This office was given the
power to assess, levy, and collect taxes, and the right to
enforce the tax laws through seizure of property and income, and
through prosecution. Not much has changed since the income tax
law of 1862, as far as the powers given to the Internal Revenue
Service. The income taxation of the individual citizen has
changed, somewhat drastically, however. The income tax was
repealed in 1872, revived in 1894 and 1895 then laid to the
side.
It wasn't until the 16th Amendment to the Constitution made the
income tax a permanent part of the constitution, and a permanent
fixture in 1913. This amendment gave Congress the legal
authority to tax income and resulted in a revenue law that taxed
incomes of both individuals and corporations. During the year of
1918, annual internal revenue collections passed the billion
dollar mark rising to $5.4 billion by 1920. Thanks to the next
series of Wars, employment increased, and so did tax
collections, rising to $7.3 billion. The withholding tax on
wages was made a part of the tax system in 1943 and this was
instrumental in increasing the number of individual taxpayers to
60 million and tax collections increased by to $43 billion in
1945.
Under the excellent leadership of Ronald Reagan, the biggest tax
cut in history was enacted into law in 1981, and then in 1986 he
(Ronald Reagan) signed into law the Tax Reform Act of 1986 that
was then, and continues to this day to be one of the most
far-reaching reforms of the United States tax system. The top
tax rate was reduced from 50% to 28%, and this was the lowest it
had been since 1916. The Tax Reform Act of 1986 did try to
remain revenue neutral by calling for a $120 billion increase in
business taxation and a corresponding decrease in individual
taxation over a five year period.
In 1993, President Clinton signed the Revenue Reconciliation Act
into law, in order to reduce the federal deficit that would
otherwise accumulate in the upcoming next few years. Then, in
1997, Clinton signed another tax act that cut taxes; cut capital
gains tax for individuals, and provided a child tax credit, and
education incentives. President Bush has each year signed tax
cuts into law, and with the Job Creation and Workers Assistance
Act provided tax relief to businesses in order to foster job
growth. So, that by now, we're all quite used to having the tax
visit each year, and either take or distribute taxes. We've all
become accustomed to the stronghold that the IRS has on our
weekly wages, our earned income, and the accountability we're
forced to give, but there was a time when we were truly free of
encumbrances, when money earned was money kept.