History of the Income Tax
The federal progressive income tax has been an issue that has been argued on the floors of Congress, in front of the United States Supreme Court, in front of television cameras, and around the dinner table. The tax served its purpose in supplementing revenue during the Civil War and World War I, but continued taking from Americans' income in peacetime, allowing fewer dollars to be spent on goods and services. When the American government was in a deficit, it was harder to argue for the abolishment of the income tax, but now that Congress is looking at a government surplus for the first time in decades, the question is raised again: Do we have to have a progressive federal income tax? Prior to the Civil War, the vast majority of government funds came from tariffs on imports. The only exception was during the War of 1812, when blockades by the British, as well as the war being with the young country's number one trade partner, lowered income from tariffs. Government revenues were accompanied by funds from the sale of public lands, such as the Louisiana Territory and the Oregon Country, as well as excise taxes, which were introduced during the War of 1812 (Hansen 62). As Abraham Lincoln, who once said "that he had no mone
Bush, and Bill Bradley have more conservative stances on the issue, but all agree that taxes need to be cut across the board (www. In 1909, two different tax bills, one with a flat tax of three percent on all income over $5,000, and another with a graduated tax from two to six percent on incomes above $5,000 were written, even though both were in direct violation of the Supreme Court's ruling. Bush for President: Prosperity With a Purpose. Pennsylvania and Virginia never attempted to ratify. Paul also points out that tax revenue accounted for 25 percent of government expenditures in 1864 and 1865, compared to only ten percent in 1862, the first full year of the income tax (29). After failed attempts to lower the tax exemption, which would make more people eligible to pay a one percent income tax, Congress passed the Revenue Act of 1916, Slocum 8which kept the minimum income to be taxed at $20,000 a year, but followed the structure below:Percentage Rate Incomes (thousands) Percentage Rate Incomes (thousands)1% $20-$40 6% $150-$2002% $40-$60 7% $200-$2503% $60-$80 8% $250-$3004% $80-$100 9% $300-$5005% $100-$150 10% Over $500The primary purpose of the Revenue Act of 1916 was, of course, to raise revenue, but lawmakers saw it as a temporary measure, or at least that worked when the traveled back to their constituents. Again, the act was a temporary one, but Waltman notes that some of the policy choices showed the beginnings of a permanent tax behavior by Congress (44-50, 54). Congress knew that all taxes needed to be increased, and the income tax became the hottest item to debate.
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