Learn about United States Income Tax, and the history of how the system began.
In this day and age, April fifteenth means "Income Tax" time to many people across the United States. This is the due date for everyone to have their federal as well as their state income taxes filed. It is an especially important date for the people who have to pay additional taxes. The Internal Revenue Service has the power to impose stiff penalties and fines, as well as imprisonment, for anyone who doesn't file, pay their income taxes, or pay them on time.
It hasn't always been this way, in fact, in the nation's early history, very few taxes were imposed on the people of the United States. From the years 1791 up until 1802, the Government collected taxes on alcohol, carriages, sugar, tobacco, auctioned-off property, corporate bonds, and slaves, and this money was used to run the Government.
So what happpened to change it all? In order to pay off the debts that were incurred from the War of 1812, sales taxes were were imposed on gold, silverware, jewelry, and watches. Congress was good enough to do away with those taxations in 1817, and, instead, the Government was supported by collecting tariffs from imports brought into the country.
This continued on until 1862, when the government again needed money to support the Civil War effort. Congress then passed the nation's first income tax law. It was based on a progressive scale, much like what is used today. The lowest tax rate was a flat three percent, and it applied to people who earned anywhere between six hundred and ten thousand dollars a year. The next highest tax rate was five percent, and it was levied on any income amount that exceeded ten thousand dollars. For people who earned a higher dollar amount, the rates were increased accordingly. The Act of 1862 was also the beginning of the Internal Revenue Service as we know it today. It started out as being called the office of the Commissioner of Internal Revenue, but the Commissioner's powers were pretty much in line with the powers that the IRS has today.
A couple years later, the tax rates were changed when the Government instituted the Internal Revenue Act of June 30, 1864. The people who earned between six hundred and five thousand dollars now paid five percent, while the people who earned over five thousand dollars paid ten percent of their incomes. This tax change was needed in order to generate additional revenue to fund the Civil War. Now, every taxpayer had to submit a list of their income as well as a list of any taxable property they might have to the tax assessor before the first Monday in May. And, fines were imposed on people who failed to abide by the tax laws.
The Civil War ended in 1865, but it took seven years for the additional taxes to be eliminated. And, in 1872, Congress did away with the imposed income tax once again. Instead of taxing people's incomes, Congress once again looked towards the taxation of tobacco and alcohol for revenue.
Many people questioned the validity of the taxes imposed during the Civil War times, and the United States Supreme Court finally handed down a ruling in the year of 1895, that said that the income tax was unconstitutional because the taxes were not collected proportionately among the states.
To correct this situation, the 16th Amendment to the Constitution was ratified on February 25, 1913. Now, income taxes were a permanent part of the United States economy, and Congress could tax incomes however they saw fit.
In later years, the withholding tax was instituted, and with the increased employment during World War II, tax collections rose to forty-three billion dollars by 1945.
Interestingly enough, over the years, there have been several grass roots efforts by Americans who still believe that the idea of a mandatory income tax, as well as the Sixteenth Amendment, are unconstitutional. At least one group claims to have proof that the amendment was not even ratified because at least eleven states did not vote on it. The main goal of these groups is to get the amendment declared legally null and void.
Today, figuring out your taxes, and the many different tax forms and schedules can still be complicated, but thanks to the technological advances made by the Internal Revenue Service, filing one's taxes is as easy as ever. If you need to obtain a certain form, you can get it from the IRS by downloading it from the Internet, or, you can have it faxed right to you.
Also, taxpayers can file, as well as pay, if need be, their federal and state taxes via the Internet too. A person can even use their credit card to pay for their tax debt. And, if their return is a simple one, they can file by using a telephone.
However, millions of tax payers still employ the services of a professional tax preparer in order to get their taxes done in accordance with the laws of Government.
