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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 The income tax was repealed in 1872, revived in 1894 and 1895 then laid to the side.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.
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