A Brief Timeline of Tax Practices of the US, Chapter 2
1861 – After Lincoln was put in office, the South walks out of Congress and form the Confederacy with a rewritten constitution to curtail the right of their newly formed country to tax.
1862 – The beginning of US income taxes is levied to help finance the rising massive debts of the Civil War.
1872 – The income tax is abolished.
1894 – Congress creates an income tax in response to southerners complaining that large reliance on tariffs pushes up the costs of imports for farmers and consumers.
1895 – The US Supreme Court sustains that the 1894 income tax law is in direct conflict with the US Constitution’s restrictions on insituting direct taxes.
1913 – The 16th Amendment is passed and removes that bar and Congress establishes an income tax system.
1917 – World War I revenue requirements bump up tax rates, with the largest rate reaching 77% in 1918.
1924 – Publication of the names of taxpayers and the amount of taxes they owe fails to achieve the task of forcing payments and the practice is given up.
1942 – Prior to World War II, the lowest income level for filing income tax left most working people out. However, the cost of the war bumped the threshold down the income ladder and put the top rate to 94% before the war was over.
1943 – In order to force compliance from the hugely increased number of taxpayers, Congress institutes tax withholding from wages, effectively turning employers into tax collectors.
In the 1940s Justice Jackson of the Supreme Court, former chief counsel of IRS, boasted about how law-abiding Americans were in reporting their income taxes. It was an honor system – there were very few informational returns. Open resistors to the taxes were few and the black market was relatively small.
1962 – IRS Commissioner Caplin said “no other nation in the world has ever equaled this record of voluntary compliance. It is a tribute to our people, their tradition of honesty, and their high sense of responsibility in supporting our government.”
1982 – Chief Justice Neely said – “cheating on federal and state income tax is all pervasive in all classes of society; except among the compulsively honest, cheating usually occurs in direct proportion to opportunity.”
Stay tuned for Part 3 of the Timeline of US Tax Policy!
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