The Personal Income Tax Essay, Research Paper
There was not many things that the American people agreed on. Taxes had always been a sensitive subject in American politics. The whole American Revolution was based on the taxation issue. When the personal income tax was instituted, Americans did not feel that the government needed to be paid by the American people. The personal income tax had a very interesting history and a very unique future would follow. What was the income tax? What did the tax pay for? What did taxes do for America?
The personal income tax got its beginnings during the Civil War. But until 1913 most Americans did not pay taxes. The Union government passed a tax to help finance the Civil War in 1861. Congress passed a similar law in 1894, but it was declared unconstitutional because any tax that was collected directly from citizens had to be proportionate to the states population. In 1909 Congress passed a law that provided for a corporate income tax (History 1). The back of the personal income was Oscar W. Underwood, Chairman of the Ways Means Committee (?To Cut 1). In February 1913, The Underwood Tariff Act was passed. The tax originally called only for people with an income of $4,000 or more to be taxed (?To Cut 3). The working class finally felt that justice had been done. The rich finally had to pay their share to keep America up and running (Nascent).
As with many laws, the strength of the Democratic Party hung in the balance. The President himself had provided his backing for the tax. The Democratic Party along with the President was prepared to stand or fall by this act. The bill made quite a statement in American politics. The bill “?makes radical reductions, seeks to eliminate alleged monopoly features in the existing tariff rates, creates a long free list, including raw wool and virtually sugar and the sponsors of the measure contend that it will lower the cost of living for the average consumer?” (?To Cut 2-3). This bill could have had a drastic affect on the American economy. While the importance of the income tax had been noted, the changing of the tax laws had always confused the taxpaying public.
When the tax was created, only people earning more than $4,000 per year were forced to pay taxes. Time took a simple tax law and changed it into a complex book of rules and regulations. When the laws were first instated, the tax brackets or how much you paid was quite simple:
Tax Rates as Of 1913
$4,000 to $20,000 Tax Rate: 1%
$20,000.01 to $50,000 Tax Rate: 2% plus 1% on the previous amount.
$50,000.01 to $100,000 Tax Rate: 3% plus 1% on first amount and 2% on the second amount.
$100,000.01 and upwards. Tax Rate: 4% plus 1% on first amount, 2% on the second amount and 3% on the third amount.
Taxes had to filed on March 1st, not the familiar April 15th that all working people had come to know in recent years.
In 1943, the pay-as-you-go system had been implemented. This allowed employers to take a certain amount out a persons check based upon how much they would make in a year (Taylor 44). This made it simpler than writing a check at tax time. More importantly, this allowed a steadier flow of income for the government. This was important because the government?s largest source of income since World War I had been the personal income tax (Taylor 14). In 1948, couples received the option to file as one. In 1969, an act was passed that closed many loopholes that allowed many wealthy people and companies not to pay taxes. In 1986, tax rates had been simplified to 15% and 28%. During the next ten years, three more brackets, 31%, 36%, and 39.6% were added (History 2). According to the IRS, electronic filing had a major impact on the way people filed taxes last year (Taylor 79). The income tax laws were complex and continued to grow. We know how the came about and how it had changed,
yet what did taxes do for the American people?
The history of the income tax had been explained, but what was the tax? The government had defined the income tax as “?the percentage of a persons income that is paid to the Federal government that benefits the people of the country. It is determined on a set of socio-economic factors that determine which bracket a person falls into” (FAQ). When the government took the money out of your paycheck, they used it for a variety of things. Perhaps it was used for police protection, fire protection, recreational facilities, defense projects, highways, airports, the elderly, the poor, the underprivileged. If you can think of a government project, department or anything the government had their hand in, tax dollars were probably used to fund it. The income tax is the source of funds that kept our country growing strong.
Although the personal income had a bad reputation in American society, it helped us shape who we were. With much opposition from the get-go, the personal income tax had expanded and changed to meet the needs and demands of our growing country. The tax was used to pay for things we take for granite every day. People had always griped about paying the government and will continue to do so. The next time someone gripes about taxes, think of what John F. Kennedy would have said: “ask not what you can do for your country, ask what your country has done for you.”
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