Don’t we just love our taxes?
July 23, 2012
by Brian Wolf

A quick tax lesson; please try not to fall asleep before I get to my point.

America was tax-free for much of its early history. However, as a country grows, it becomes almost impossible to survive without some kind of taxation. It was, after all, taxes that led Americans to revolt against the British in 1773.

Following the Revolutionary War, the new American government was understandably cautious when it came to taxation – direct taxation was prevented by the Constitution for all practical purposes. Therefore, our government revenues had to be collected through tariffs and duties on certain items.

These excise taxes, on liquor, tobacco, sugar, legal documents, etc., weren’t any more popular than the dreaded income tax, but at least a person could try to avoid them. The personal income tax was introduced in 1913, and people have been trying to push back ever since.

You see, nobody likes to pay taxes, but everyone likes the benefits they provide. At first, income taxes were considered a temporary tax to help raise money for war. During the American Civil War, the first US income tax was created, but this was only meant as a temporary measure to help pay for the war. It was repealed in 1872. By the 1890s, the US government was hoping to create a permanent income tax.

However, it wasn’t until the 16th Amendment to the Constitution was ratified in 1913, that permanent income tax became the law.

So, how has the permanent tax burden been received over the last 100 years? I’d say with mixed results; falling somewhere between a necessary evil and totally unconstitutional. Although, as a side bar note, the Supreme Court has always upheld the government’s right to tax. Can anyone say “Obama care?”

So, if you want to look for the silver lining in our tax history, give a quick look at the top federal tax rate history. In 1913, it was 7 percent, but quickly rose to 67 percent by 1917. The top tax rate has been 70 percent or higher for about half of our entire tax history, and from 1950 until 1963, the top rate was over 90 percent! Ouch! The good news is that our current 35 percent top tax bracket is still less than it was 69 of the past 100 years.

So, why do we have a “Tea Party” movement today? My guess is that a lot of people believe that if we took the waste out of all areas of our government, we might be able to dial back those taxes to single-digit numbers and actually have money to live on. Sounds like a crazy, radical, wonderful idea.

“In this world, nothing can be said to be certain, except death and taxes.” – Benjamin Franklin.

“In this world, nothing can be said to be certain, except death, taxes and BIG government waste.” – Brian Wolf

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