A couple of weeks ago, I wrote about the rise of withholding income taxes from payroll checks. I mentioned that today we enjoy some of the lowest income tax rates in the history of the country. However, to get the full impact of what we are paying tax wise, we should include all the other taxes that we now pay that were unheard of back in the day.
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But lets start with what was levied initially:
1. Excise taxes: First levied July 4, 1789, they accounted for 80-95% of all federal government revenue. Tariffs were the main source of government revenue through the 1800s.
2. Property tax: One of the earliest taxes imposed. In 1634, property taxes were assessed by the colonies. In 1796, 14 of the 15 states collected property tax. Delaware levied tax on income from property, but not on the property itself.
Not too bad.
But as time rolled on, the government realized it should tax everything!
The excise taxes imposed today are too numerous to list here. Revenues from excise taxes in 2010 totaled $66 million.
In 1861 and 1862, an income tax was levied to finance the civil war. Then in 1913, our modern system came into being. Individual federal rates today run from 10% to 35% and corporate rates from 15% to 35%. And dont forget about state income taxes.
Employment taxes: A reader wrote that although the rates were higher earlier on, we did not have to contend with Social Security (6.2%) and Medicare tax (1.45%) withholdings, which, by the way, is also matched by the employer. Nor did employers have to pay in FUTA (Federal Unemployment Tax) 0.8% of up to $7,000 of wages per employee. Then there is SUTA (State Unemployment Tax), which is levied at the state level and varies from state to state. California rates run from 0% all the way up depending on the number of layoffs and firings (experience rate) with the initial rate levied on a new employer at 3.4% of first $7,000 in employee wages. Did I mention State Disability Tax? Some states tax wages at the county and city level as well.
Sales tax: Today 45 states collect sales tax, which was first introduced in Pennsylvania as a mercantile license tax in 1821.
What else have we got? Heres a list of the taxes which have exploded onto the scene in recent decades. Ive included some of the rates:
Accounts Receivable Tax
Building Permit Tax $.82 to $336.81 per sq foot depending on type of construction (San Francisco)
CDL license Tax - $31 to $66
Cigarette Tax .17 to 4.35
Dog License Tax
Fishing License Tax - $6.44 to $781.50 for lifetime fishing license in CA
Food License Tax
Fuel Permit Tax
Gasoline Tax - 26.4 to 68.0 cents per gallon combined federal and state
Gross Receipts Tax levied by many states in AZ its called a transaction privilege tax. Excuse me? .096% (Delaware) to 7.875% (New Mexico) for the privilege of doing business in the state
Hunting License Tax
Inheritance Tax federal 35% of the value of the estate in excess of $5 million set to rise in 2013 to 55% of an estate valued at more than $1 million
Inventory Tax charged by 15 states
IRS Interest Charges and IRS Penalties (tax on top of tax) loan sharks! Penalties are .5% per month up to 100% for employers on trust fund (payroll tax) liabilities, Interest rates change quarterly
Liquor Tax 26.03 cents per gallon (WA) to low of 2 cents per gallon
Marriage License Tax
Occupancy Tax (hotel stays)
Personal Property Tax
Real Estate Tax
Service Charge Tax
Road Usage Tax
Recreational Vehicle Tax
State Income Tax 0% to 11% (Hawaii, Oregon), 9 states with no income tax
Telephone Federal Excise Tax 3%
Telephone Federal Universal Service Fee Tax
Telephone Federal, State and Local Surcharge Taxes
Telephone Minimum Usage Surcharge Tax
Telephone Recurring and Nonrecurring Charges Tax
Telephone State and Local Tax
Telephone Usage Charge Tax
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax
Ouch! Did that hurt your eyes as much as it did mine?
Final closing note: In 2005, the folks who run the Academy Awards went before the IRS and said, Hey, should we be sending 1099s to the celebrities who get gift bags during the awards ceremonies? You see, these gift baskets dont contain just a cheese stick some stickers. Were talking serious stuff: electronics, luxury vacations, jewelry, and other high end products. The IRS said, Yeah, we can use all the money we can get!
So if you provide goodie bags to all those little guests at your kids birthday party, dont forget to send a 1099 at year end! Is that what its going to come to?
Bonnie Lee is an Enrolled Agent admitted to practice and representing taxpayers in all fifty states at all levels within the Internal Revenue Service. She is the owner of Taxpertise in Sonoma, CA and the author of Entrepreneur Press book, Taxpertise, The Complete Book of Dirty Little Secrets and Hidden Deductions for Small Business that the IRS Doesn't Want You to Know, available at all major booksellers. Follow Bonnie Lee on Twitter at BLTaxpertise and at Facebook.