Income tax has evolved over the years
Friday, April 04, 2014 11:00 AM
Today's "bet you didn't know that" moment comes from Connersville News-Examiner reporter Darrell Smith.
Smith wrote an interesting story about the history of the federal income tax (which, by the way is due by April 15).
The first year the federal income tax went into effect, the entire tax code was four pages long, including one page of instructions. In 2013, the tax code is 71,684 pages. That first year was 1913.
Life was so much simpler back then. Income was income and expenses were expenses. Taxpayers just grouped them together into two categories.
Loc.gov indicates the first U.S. income tax came during the Civil War in 1862 to raise money for the war effort but was repealed 10 years later. Congress approved a federal income tax in 1894 but the U.S. Supreme Court ruled it unconstitutional because Article I, Section 8 of the Constitution prohibited direct taxes. Congress proposed the 16th Amendment in 1909 to alleviate that issue.
The amendment was ratified in 1913 with just four states - Connecticut, Florida, Rhode Island and Utah rejecting the proposed amendment and Pennsylvania and Virginia never considered it, according to "50 Fun Facts About Taxes. The Indiana General Assembly approved an income tax in 1933.
The 1913 tax form 1040 taxed anyone earning more than $3,000. A super tax was imposed at 1 percent for incomes $20,00-$50,000; 2 percent for $50,000 to $75,000; 3 percent for $75,000 to $100,000; 4 percent for $100,000 to $250,000; 5 percent for $250,000 to $500,000; and 6 percent for incomes above $500,000.
We'll help you with the math. In 1913, the tax for a single person based on a gross income of $30,000 (a hefty salary for back then) was $340. Today, the same income comes with a tax of $2,558.
To those who are putting off doing their taxes, consider this ... Even though the forms are more complicated today, we've got computers to do most of the hard work.
Tax experts agree: If people do their own taxes, the biggest mistake is failing to take all the deductions or credits they are due.
Income taxes aren't going to go away. So buck it up, get those forms completed and send Uncle Sam that check. And, if you're one of the fortunate ones who gets a refund - enjoy the windfall. You worked hard for it.