Who said all taxpayers are created equal?
Vertical equity states that people in different income groups should pay
different rates of taxes. Our current tax system is one of vertical equity. -Text from the IRS
16th
Amendment
US Federal Income Tax
Far reaching in its social
as well as its economic impact, the income tax amendment became part of the
Constitution by a curious series of events culminating in a bit of political
maneuvering that went awry.The financial
requirements of the Civil War prompted the first American Income Tax in 1861.At first, Congress placed a flat 3-percent tax on all incomes over $800
and later modified this principal to include a graduated tax.Congress repealed the income tax in 1872, but the concept did not
disappear.
After the Civil War, the growing
industrial and financial markets of the Eastern United States generally
prospered.But the farmers of the South
and West suffered from low prices for their farm products, while they were
forced to pay high prices for manufactured goods.Throughout the 1860?s, 1870?s, and 1880?s, farmers formed such political
organizations as the Grange, the Greenback party, the National Farmers Alliance,
and the People?s (Populist) Party.All
these groups advocated many reforms considered radical for the times, including
a graduated income tax.
In 1894, as part of a high tariff bill,
Congress enacted a 2-percent tax on income over $4,000.The tax was almost immediately struck down by a five-to-four decision of
the Supreme Court, even though the Court has upheld the constitutionality of the
Civil War Tax as recently as 1881.
Although farm organizations denounced
the Court?s decision as a prime example of the alliance of government and
business against the farmer, a general return of prosperity around the turn of
the Century soften the demand for reform.Democratic
Party Platforms under the leadership of three-time Presidential candidate
William Jennings Bryant, however, consistently included an income tax plank, and
the progressive wing of the Republican Party also espoused the concept.
In 1909 progressives in Congress again
attached a provision for an income tax to a tariff bill.Conservative, hoping to kill the idea for good, proposed a constitutional
amendment enacting such a tax; they believed an amendment would never receive
ratification by three-fourths of the states.Much
to their surprise, the amendment was ratified by one state legislature after
another, and on February 25, 1913, with the certification by Secretary of State
Philander C. Knox, the 16th amendment took effect.Yet in 1913, due to generous exemptions and deductions, less than 1
percent of the population paid income taxes at a rate of only 1% of net income.
The full potential of the income tax for
revenue and for the redistribution of wealth was realized for the first time
during the New Deal.President Franklin
D. Roosevelt declared ?our revenue laws have operated in many ways to the unfair
advantage of the few, and have done little to prevent an unjust concentration of
wealth and economic power.?The Revenue
act of 1935 popularly called the Wealth Tax Act, went a long way toward
remedying the evils described.It
provided steeply graduated personal income taxes up to 75% on income in excess
of $5 million.Wealthy Americans deplored
the leveling effect of a graduated income tax and called President Roosevelt a
?traitor to his own class.?Almost
immediately, income tax evasion became an important area of criminal activity.
President
Roosevelt signing Social Security Act into law, August 14, 1935
The income tax did not
directly affect most Americans until World War II:In 1939 only 5 percent of Americans paid federal income taxes.But the Revenue act of 1942 raised tax rates, lowered exemptions, and
created the Victory Tax of 5 percent on incomes over $624, broadening the income
tax base considerably.The new payroll
withholding tax was the greatest change for the majority of Americans. The
?pay-As-You-Go? tax plan, developed by Beardsley Ruml, the treasurer of the R.
H. Macy department store, was adopted in the Current Tax Payment Act of 1943.The result of the new tax plan was that over 74 percent of Americans were
paying federal income taxes by 1945.
SOCIAL
SECURITY: SocialSecurity History Home Page - This is the history web site of the socialsecurity administration with information on the history of SocialSecurity
and the SocialSecurity Administration.
TAX FORMS:ARE AVAILABLE THROUGH IRS LOCAL
OFFICES, INTERNET, MAIL, COMPUTER, OR TELEFAX.
Office: You
may pick up forms or publications and even meet with IRS assistors for
answers to your tax questions at your nearest IRS office - Where
to File - IRS Offices. You can also call 1-800-829-1040
for recorded explanations that may answer your questions.
Phone: IRS
forms line -- 1-800-TAX-FORM (1-800-829-3676) -- is open from 7:00 a.m. to
11:00 p.m., Monday through Saturday. You should know what forms you
want by number, and the name or number of the publication. Taxpayers should
allow up to 15 working days for telephone orders to be processed.
Telefax: available
24 hours a day, seven days a week 703-368-9694 --
offers 144 forms with instructions by return fax. You can request
that the system fax a list of available items or you can find the order
numbers in the various tax instruction booklets.
TAX
HISTORY: TaxHistory Project at Tax Analysts - providing scholars, policy
makers, and the media with information on the history of American taxation
and Tax
World - explanations of tax policy, history, courses,
glossaries downloadable forms and a great menu of links to other important
sites.
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