Archive for April 15th, 2010

Tax Day, 2010

[this is a redo from last April 15]

You probably can’t read the form to the left (it’s available online so no big loss). This is the first 1040 form issued by our federal government in 1913 — the first year (since the income tax passed during Lincoln’s administration was repealed in 1872) that Americans paid this thing called the “income tax.” Note the tax rates:

1% on income over $20,000 and not exceeding $50,000
2% on income over $50,000 and not exceeding $75,000
3% on income over $75,000 and not exceeding $100,000
4% on income over $100,000 and not exceeding $250,000
5% on income over $250,000 and not exceeding $500,000
6% on income over $500,000

This meant that the vast majority of Americans were exempt from paying anything since the income for the average American was well below $20,000. But even the most wealthy only paid 6% of their income. Those were the days.

As you can imagine, the passage of the income tax was hotly debated. Opponents of the measure objected that once passed the tax rates could be increased to any level whatever. One opponent was indignant over the thought that Congress could raise taxes as high as they pleased. The day might even come, he stated, when the tax rate would climb as high as twenty percent! Senator William Borah of Idaho, was outraged that anyone could even imagine this law being abused to such an extent:

“Who could impose such socialistic, confiscatory rates? Only Congress. And how could congress — the representatives of the American people — be so lacking in fairness, justice, and patriotism?”

Borah could not conceive the American people ever allowing Congress to pass such oppressive tax laws. In his mind, if Congress ever had the audacity and disregard for common morality to pass such confiscatory rates (as a 20% tax would be), the people would revolt.

By 1918 the highest tax rate had been raised to 77%.

We’re still waiting for the revolt.

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