Page 18 - IAV Digital Magazine #591

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A Brief History of Taxes In The U.S.
Taxes in the U.S. didn't always exist as they do today. America's first citi- zens were subject to very few taxes.
As time went on, more levies were added: federal income tax, the alternative minimum tax, corporate tax, estate tax, Federal Insurance Contributions Act (FICA) taxes, and so on. Some were increased, while others were repealed—only to be added again.
The country was income- tax-free in its infancy. That's because there was no federal government to establish one. The British government, however, imposed a variety of taxes on the colonists. These included a head tax, real estate taxes, and the infa- mous tea tax that led to the Boston Tea Party.
After the Revolutionary War, the Constitution gave Congress the power to impose taxes and other levies on the general pub- lic. States were responsi- ble for collecting and passing them on to the
federal government. Most of these were excise taxes—taxes imposed on specific goods or services, such as alcohol and tobacco. The government also tried direct taxation— taxing things an individual owned. That didn't last, and the feds went back to collecting excise taxes.
The Civil War led to the creation of the country's first income tax and the first version of the Office of the Commissioner of Internal Revenue—the earlier version of what we now call the Internal Revenue Service (IRS).
This office took over from individual states the responsibility of collecting federal taxes. Excise taxes were also added to almost every commodity possi- ble—alcohol, tobacco, gunpowder, tea.
The federal income tax as we know it was officially enacted in 1913.
National Archives. "16th Amendment to the U.S. Constitution: Federal Income Tax (1913)."
Corporate income taxes
were enacted slightly earli- er, in 1909.
Tax rates tend to change—often, but not always, rising. When the federal income tax was implemented to help finance World War I in 1913, for example, the marginal tax rate was 1% on income of $0 to $20,000, 2% on income of $20,000 to $50,000, 3% on income of $50,000 to $75,000, 4% on income of $75,000 to $100,000, 5% on income of $100,000 to $250,000, 6% on income of $250,000 to $500,000, and 7% on income of $500,000 and up.
Tax rates were the same for everyone who filed taxes, and there was no filing status. This meant all taxpayers paid the same rate whether they were single, married, or heads of households. That changed over time. Tax rates increased consider- ably, then dropped, with the highest marginal tax rate settling at 37% as of 2023
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