History of the U.S. Income Tax Essay

The income levy levyation revenue of the join States of the States, be it federal, state and local, has changed over time. Different batch pushed the brass to create imposeation and to a manpowerd the existing assessation laws. During the pre-Revolutionary struggle era in the 1700s, taxes were non enforce by the colonial regime as their enquire for tax revenue did not exist. The colonies, on the sepa step hand, had greater responsibilities therefore, had greater hold for tax revenue.Because of this, different types of taxes were imposed by the colonies. The southern colonies imposed taxes on imports and exports while the middle colonies imposed taxes on property and a poll tax on each big(p) male. The New England colonies, on the other hand, collected taxes through property taxes, income taxes and attain taxes. When the English Parliament realized the need for money to move over for the french war, it imposed different taxes to the American colonies through the Stamp Act which was enacted in 1765.Later on, this Stamp Act was revised to include taxes for permits, newspapers, legal documents and playing cards. The Townsend Act was later on enacted by the Parliament to include taxes for paint, teatime and paper . subsequently a decade of stipendiary taxes, there was oft resistance to the tax imposed by the Parliament. During the Boston Tea society in 1773, colonists, dressed as Native Americans, threw 342 chests of tea from a enthrall of the British East India Company to the Boston Harbor.In 1775, Isaac Backus during the Massachusetts concourse said that Its not all America now kindly to Heaven once morest injustice of existenceness taxedWe are persuaded that an entire freedom from being taxed by civil rulersis not mere favor from any men in the world save a right and property disposed(p) us by God, who commands us to stand fast in it . tax revenue is considered as one of the factors that led to American war for Independence c onsequently, when America gained its Independence, Article 1, Section 9, Article 4 of the U. S. Constitution in 1787 declare that there be no capitation or any direct taxes imposed on the citizens.The national authorities had really little responsibilities during these times and relied lonesome(prenominal) on donations given by the States for its revenue. However, in 1789, the Founding Fathers realized that it could not function at its efficiency if it relied only on other governments donations indeed the federal official Government was granted the authority to impose taxes. The sensitivity to taxation was still existing at this point in time hence the government has to be careful on how it impose taxes so as to minimize resistance from its volume.Alexander Hamilton, Secretary of the Treasury in the 1790s, distinct that a sin tax was imposed . with the sin tax, only items which society thinks is deviant or vice were taxed such as distilled spirits, alcohol and whiskey. How ever, this still led to the armed revolt called Whisky disintegration by a group of South Pennsylvania farmers. Still during the 1790s, the Federal Government imposed direct taxes to owners of houses, slaves and land. However, when Thomas Jefferson was elected to office in 1802, these direct taxes were removed and for the succeeding 10 courses, only excise taxes were imposed.The causa for this was because he realized the inverse relationship of tax directs and tax revenue wherein the higher the taxes imposed on the citizens, the slower the economy grows hence the tax revenue declines. A cut in the range of tax means that income for the family will become higher, expenditures become higher and hence, the economy experiences growth. During the 1812 warfare, the need for tax revenue resurfaced again hence taxes on the sales events of gold, jewelry, watches and silver gray were imposed. Treasury notes were also issued to raise money.However, in 1817, the Congress revoked these ta xes and for the next 40 years, government revenue was groundworkd on high customs duties and sale of government or public land . In 1861, when the Civil War erupted, the Revenue Act of 1861 was enacted. This Act restored the prior taxes on personal income. This tax was similar to the modern income tax because it was based on a tardy taxation of withholding tax from its source. A person earning $600 to $10,000 a year paid 3% tax. Persons with income higher than $10,000 paid a higher rate of tax.In 1862, the debt created by the war was rising at a rate of $2 million per day hence there was another need for the government to increase its revenue. Because of this, the Congress passed another tax imposition on items such gunpowder, playing cards, telegrams, iron, pianos, yatchs, drugs, among others. After the Civil War, the need for revenue declined and hence the income tax was abolished and only the excise taxes remained from 1868 to 1913. The War Revenue Act in 1899 was enacted to r aise funds for the Spanish-American War.Government revenues, thru this Act, was raised through sales of bonds, tax imposition on recreational facilities, beer and tobacco. However, the Supreme Court realized that the people of America were becoming aware that the high tarrifs and excise taxes were not wide to the economic welfare of the nation and that these taxes were usually paid by the less(prenominal) affluent citizens. Hence, there was an agreement that business income instead was imposed tax. By 1913, Congress enacted a new income tax law which imposes 1% to 7% for persons with income above $500,000.These people earning above $500,000 was only 1% of the total United States population . During World War I, the United States needed to increase its revenue again to fund the war. The 1916 Act raised the tax imposition from 1% to 2% and could go as high as 15% for those with income of more(prenominal)(prenominal) than $1. 5 million. By 1917, the government still needs further go vernment revenue to pay for the war, hence the War Revenue Act of 1917 was enacted. Through this Act, exemptions were lowered and tax rates change magnitude that those who earn $40,000 needs to pay 16% tax rate.In 1918, the tax rates were further increased. Those citizens paying 1% had to pay 6%. The highest rate in 1917 was 15% but during 1918, this was increased to 77%. Due to this increase in tax rates, government revenue increased from $761 million during 1916 to $3. 6 billion in 1918. After the war, the government revenue rose and the government decided to cut taxes to 1% bottom rate and 25% top rate . The Great impression during the late 1920s and early 1930s pushed the government to once again increase the tax rates.The revenue Act of 1932 was enacted and by 1936, the bottom tax rate was at 4% and the top tax rate reached 79%. When the World War II came, another price hike came into move into which altered the tax rates. Those with taxable income of less than $500 paid a bottom rate of 23% taxes while those earning taxable income of over a million dollars paid about 94% of taxes . The tax structure in the United States was also heavily altered in that the number of taxpayers increased from 4 million during 1939 to roughly 43 million during the World War II.Throughout all these years of implementing taxation, the government learned a very important lesson which until now is being valued by government officials and economists and has moved(p) the tax laws enacted in the country the marginal dollar is far more important to the economy compared to the tax rate being used. The Economic recuperation Tax Act of 1981 was implemented with this important lesson in mind. Unlike the previous taxation laws, this Act was intended to focus on marginal tax rates and it also included consumption taxes.However, due to the deep respite experienced by the country in 1982, the government was once again faced with the need to increase tax rates to overcome reckon de ficits. Following the 1982 recession was an economic boom which lead the country to consider that marginal tax rates are very important for a strong economy. During the Reagan administration, tax rates were further reduced and had a broader base through the Tax Reform Act of 1986. This reduced tax rate from 50% to 28% while business taxes were reduced from 50% to 35% .In 1997, the Taxpayer Relief Actof 1997 was enacted. The significant party of this Act was the Per Child Tax credit which benefited the lower-income families. During the Bush administration in 2001, the government experienced a budget surplus of about $281 billion hence a tax cut was once again conducted . This tax cut included aggrandizement the Per Child Tax Credit from $500 to $1,000 per child, as well as increased the Dependent Child Tax Credit. Until now, this tax law is being implemented and is expected to boost economic growth for the country.