In the U.S. paying taxes is one of the certain things in life. Federal income taxes and estate taxes are just some of the few that have become a part of the fabric of American life. When looking back at the tax history of the United States, there have been numerous changes leading to the current state of taxes. This has often coincided with changes in the government as well as changes in the overall state of the country. During the early years of the U.S. Federal taxes were fairly non-existent, while states were able to levy taxes. It wasn't until the late 1700s that changes started to emerge.
In 1791, in an effort to create a steady stream of income for the government, an excise tax was suggested on U.S. whiskey. The farmers felt this was what they had fought against during the American Revolution. This led to a violent resistance movement meant to stop the collection of taxes. In 1974 the protests came to a head when the home of a tax inspector was attacked. Although the attack was suppressed, the taxes were difficult to collect and were eventually repealed in 1800 by Thomas Jefferson's Republican Party. The history of estate tax in the United States dates back to 1797. It was signed into law in efforts to pay for a war with France; however, it was repealed in 1802.
The history of U.S. income tax can be tracked back to 1861, when the very first Federal income tax went into effect. Its purpose was to help the Union pay for the Civil War. The tax bill, which was called the Revenue Act of 1861, called for a three percent tax on incomes of over $800; however, it never went into affect. Another income tax bill was passed by the Union in 1862, which also played a part in the history of estate tax in this country by reinstating the estate tax in efforts to fund the Civil War. It would, ten years later, be declared unconstitutional. This tax bill was signed by President Lincoln and it placed a three percent tax on incomes no lower than $600 and no higher than $10,000. In addition, any incomes higher than $10,000 would face a five percent tax. The Union wasn't the only one to collect taxes as a result of the Civil War. In 1863, the Confederacy authorized income taxes on incomes that were over $1,000. The history of U.S. income tax that is most often considered the first income tax occurred with the passing of the 16th Amendment. The 16th Amendment was passed in 1909 by Congress and was ratified in 1913. It allows the collection of Federal income taxes without distributing the money with the states.
President Franklin D. Roosevelt was the source of other major changes in tax history. During the Great Depression, Roosevelt introduced the Revenue Act of 1935 to help generate the money to help create jobs. This Act was commonly referred to as the "Wealth Tax" as it took as much as 75 percent from the highest incomes. In 1937 he created The Revenue Act of 1937 to close up loopholes that were allowing the rich to evade paying the necessary taxes. He also created the Revenue Act of 1942, which was known as the Victory Tax. This was a mass tax that was designed to help pay for the war by witholding money from employees' paychecks, thereby increasing the number of American workers who paid taxes. In 1981, President Ronald Reagan signed the Economic Recovery Tax Act of 1981 into law. This law accomplished both tax and budget reductions by lowering income tax rates for individuals, providing incentives to small businesses and encourage innovation, and created a ten percent exclusion on income for duo-earning married couples.
The Whisky Rebellion
The Civil War
The Revenue Act
The 16th Amendment
Economic Recovery Tax Act of 1981