It is a common saying that there is nothing as certain as death and taxes. However, the issue with taxes is the inconsistency and the complication. Also, tax is not as old as human civilizations because the first citizens of America did not have to deal with a series of taxes like it is today.
In time, more tax levies arose – corporate tax, federal income tax, estate tax, Social security and Medicare taxes, and many more. While some taxes increased, others were revoked and later re-added. Here is a brief history of the origin of many common taxes
America before the Existence of Income Taxes
The origin of taxes (income taxes mostly) dates back to thousands of years. However, in the United States, this was not the case as the first citizens did not deal with income taxes. This can be traced to the absence of the Federal Government at the time.
However, the colonists dealt with the then British Government, which led to various taxes for the colonists like real estate taxes, head tax, and tea tax.
When the revolutionary war ended, congress was authorized by the constitution to impose taxes on the general citizens along with other levies. The state was entrusted with the mandate to collect the taxes and remit them to the Government.
However, many of these were excise taxes (taxes on specific services and goods like alcohol, luxury items). The Government then attempted direct taxation – taxes on properties of citizens, which did not stand the test of time as they resorted back to excise taxes.
Income taxes
After the Civil War, the country's maiden income tax was created alongside the then Internal Revenue Commissioner's office – the old version of what we now know as the Internal Revenue Service. This office was responsible for tax collections from each state. Also, the excise tax was included in almost every commodity available.
Officially, the federal income tax was approved in 1913 even though corporate income tax came a little earlier – 1909.
Other taxes
In 1797, the US saw its first estate tax to fund the navy. Even though it was suspended for a while, it was re-enacted due to finance wars' needs. Modern estate tax came along in 1916.
The years 1920 to 1930 saw the creation of series of multiple taxes:
In 1924, the gift tax was created.
West Virginia had its sales tax in 1921. In 1933, eleven different states followed suit. 18 more states joined the league in 1940. Today, a few states like Montana, Delaware, Oregon, and Alaska has no state tax
In 1935, President Franklin signed and approved the Social Security Act. The first collection of these taxes was in January 1937, even though the disbursement of benefits didn't come until January 1940.
1978 saw the birth of the Alternative Minimum tax – a particular form of federal income tax. It is a parallel system that utilizes a unique set of rules to estimate the taxable income when all deductions are taken. The idea was to prevent taxpayers who might want to dodge taxes.
Tax rates over the years
The tax rate has changed over the years. Sadly, the changes are never in favor of Americans. This is what many Americans dread whenever there is an announcement of a new tax. For instance, the implementation of the federal income tax to take care of the 1913 World War 1 had the following rate:
Everyone paid the same tax rate since filing status did not exist. The implication of this was that whether married, single, divorced, or head of household, the filing tax rate was the same.
However, there were changes with time as the rates increased until the highest marginal rate got to 37%. Tax rates today are a factor of the filing status.
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