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Monday, April 13, 2009

 

6 Odd Historical Tax Facts

6 Odd Historical Tax Facts

Heather Whipps

LiveScience's History Columnist

posted: 13 April 2009 01:52 pm ET

That collective groan being heard around the country can only mean one thing — it' s tax time! The painful tradition of modern income tax collection in the United States is 96 years old this month, though the federal government had dabbled in it on and off since the Civil War as a way of balancing the books when money was tight. From the early days when the tax wasn't even collected to the incredible 94 percent rate paid during one period, here are six things you probably didn't know about the system's history.

1. Working out the kinks

The first personal income taxes in the United States were levied in 1861 by an act of Congress, mostly to foot the bill for the newly erupted and very costly Civil War. There were so many questions and problems with the new system, however, that nothing was collected until the following year.

2. No money necessary, thanks

Income tax, along with many other taxes imposed during the Civil War, was repealed after 1865 because the government simply had no need for the extra revenue. The majority of federal income came from taxes on tobacco and alcohol, which were hot commodities at war's end.

3. Maybe they had it right ...

Another newly enacted income tax was actually declared unconstitutional in 1895. The law stated that any tax must be levied in proportion to each state's population; this flat tax wasn't, and was quickly shooed aside by the Supreme Court.

4. Look out Al Capone

When the modern incarnation of U.S. income tax was introduced in 1913, the word " lawful" was included in the text, referring to the kind of revenue that could be taxed. With the loose definitions of that term under question, the government deleted the word in a 1916 amendment. As a result, many bootleggers and criminals who had previously evaded the law were jailed on tax evasion.

5. Supporting the war effort

Think you give a lot to Uncle Sam today? Just be thankful you weren' t paying income tax in 1945, when the country' s top earners doled 94 percent of their salaries over to the government, mostly to recoup costs incurred from the war effort. Taxation rates for the highest income brackets hovered between 82 and 92 percent until 1963.

6. SOS, IRS!

In 1940, the instruction booklet that went along with the United States' standard 1040 income tax form was two pages long. For the 2008 tax year, it is 95 pages long. No wonder more Americans than ever are enlisting someone to help prepare their taxes, even to file their returns online.


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