Ha! Imagine Paying 1% Tax on $3,000

Revelers from the day before yesterday might recall spending some sultry summer evenings at Club Avalon in Anglesea. As they sweat and curse to themselves, swearing at the IRS and anything connected with income tax, they will continue to search for medical bills or that state homestead rebate form telling how much you got back last year to finalize their Form 1040, they may recall comedian Cozy Morley uttering his immortal, “I worked so hard for that money I thought it was mine!” It always drew a howl from the audience.
To be sure, paying income tax is among life’s more unpleasant tasks. In fact, some faithful readers might even put this week’s edition aside as they make that last-minute scramble to find forms and fill worksheets in order to make the tax filing deadline of April 17 this year.
Just for the sake of history, I went to the IRS site to see what was there regarding background on this onerous yoke placed upon our weary shoulders (and wallets).
According to the service, “The roots of IRS go back to the Civil War when President Lincoln and Congress, in 1862, created the position of commissioner of Internal Revenue and enacted an income tax to pay war expenses. The income tax was repealed 10 years later. Congress revived the income tax in 1894, but the Supreme Court ruled it unconstitutional the following year.”
Think about that golden time in U.S. history when there was no income tax. It would be unimaginable today to dream of looking forward to payday, and thinking, “Every dollar I made is mine. I can spend it any way I want to spend it.”
It was a time when those dirty industrialists were making tons of filthy lucre and keeping it all stashed away for themselves. Now that is the American dream. That’s a story for another time.
Then came the 16th Amendment, and it’s been downhill for taxpayers since that sad day. That dollar we made, well, kiss it goodbye.
“In 1913, Wyoming ratified the 16th Amendment, providing the three-quarter majority of states necessary to amend the Constitution. The 16th Amendment gave Congress the authority to enact an income tax. That same year, the first Form 1040 appeared after Congress levied a 1 percent tax on net personal incomes above $3,000 with a 6 percent surtax on incomes of more than $500,000.”
Just for kicks, I printed a copy of that historic first Form 1040. It was so plain and simple, even I could fill it in without aid of a tax adviser or computer to answer questions. Hateful though it was, the form seems laughable in today’s money.
The penalty miscreants faced? “For failure to have this return in the hands of the collector of Internal Revenue on or before March 1 is $20 to $1,000.”
Bottom line, for those who made $3,000 or more that year tax was 1 percent. That’s $30 for the math-challenged. Taxpayers included “nonresident aliens” who “derived income from property owned and business, trade or profession carried on in the United States by him.” That wording almost seemed to exclude women from paying, but probably did not.
“In 1918, during World War I, the top rate of the income tax rose to 77 percent to help finance the war effort. It dropped sharply in the post-war years, down to 24 percent in 1929, and rose again during the Depression. During World War II, Congress introduced payroll withholding and quarterly tax payments.”
Fast forward to today. The tax code is so thick, and contains so many fine details, it takes a Masters in Business Administration to fully comprehend the rules that govern our wallets.
The advent of computers and e-filing has reduced the one-time long lines that once filled post office lobbies with those last minute, before midnight, filers who would drop off their documents into the mail.
If nothing else comes of this year’s filing, it will likely bring about a vow, not unlike a New Year’s resolution. “Next year I will NOT go through this grief.” “I WILL keep good records.” “I WILL file everything neatly, not shove them all in a drawer and hope the tax fairy will make magic at the last minute.”
Add to those vows “I WILL pay attention to the news about how my money is spent.” “I WILL stay well informed of political candidates who say they will cut my taxes. If they are elected, I WILL remind them, by e-mails and letters to the editor, that what they are doing is either what they said or not.”
We are asked to be accountable for every dollar. We must make those who spend our dollars every bit as accountable, and not accept the notion of waste as being normal.