The Federal Income Tax Turns 100, But No One is Celebrating

by Gerri Willis

 

Most of us spent yesterday celebrating the Super Bowl, but you might not have realized there was another momentous occasion to mark.             

The 100th birthday of the Federal Income Tax!

Where did this dreaded form of taking our money come from?

Time for a little History lesson...

It all started way back in 1861, when Abraham Lincoln needed to raise money immediately to fight the Civil War.

The first income tax was born as a flat tax.

Those making over $800 a year, or $20,000 today, were taxed a whopping 3%!

The next year, Congress decided it really liked this idea that people would just send money their way and introduced a sliding scale.

Now those making about $10,000, or $229,000 now, would be taxed 5% and the idea of taxing the rich was born!

But guess what! The tax was repealed in 1866... yes, Congress decided they didn't want free money anymore!

That is until 1894, when they tried to bring it back, but this time the Supreme Court stepped in, calling the tax unconstitutional!

So a Republican (yes, a Republican) offered a constitutional amendment, and 100 years ago yesterday, Delaware became the 36th state to ratify it.

And voila! The income tax was official!

Before you go and start cursing the lawmakers from 1913, the income tax looked a lot different then compared to now.

For starters, this is what the tax code looked like a century ago.

38 pages. That's it.

Today it's nearly $74,000 thousand pages long.

With a top tax rate of nearly 40% compared to a top tax rate of 7% back then, and that only hit people making a $500,000. or $11.5 million today!

In 1913, about 50 million people were employed so their income tax revenue was just over $28 million, or $655 million in 2012 dollars.

Today, about 150 million people are in the labor force and they paid more than $1 trillion, trillion with a "t", last year alone!

Even if you tripled the revenue from 1913 so the number of taxpayers would equal out, they would still only have paid about $2 billion.

For those tax-lovers out there, meaning Democrats, I do know that during the last 100 years things have been much worse than they are now including during WWII, where the highest tax rate was 94%, meaning almost all of what people earned went to Uncle Sam.

But just because it was worse, doesn't mean it's good now.

Despite the ridiculous amount of revenue the IRS brings in every year, President Obama and Harry Reid still want more.

100 years is certainly a milestone, but this is one birthday I won't be celebrating!