The famous saying “In this world nothing can be said to be certain, except death and taxes” is often attributed to Benjamin Franklin. Whether or not Franklin was the first to say this famous quote, the quote itself is quite a great way to put forward the feeling people have towards tax.
While most don’t jump out of joy when income tax filing approaches, it is nevertheless an important part of one’s finances. But how to best manage your income taxes? In this guide, you can learn about income tax, the benefits of managing your taxes and tips for ensuring you are doing the right things when it comes to income tax.
What is income tax?
Income tax is one of the most known taxes around the world. It is a tax governments impose on financial
…show more content…
There are different methods countries use when it comes to deciding income tax rates. In the majority of cases income tax for individuals follows a progressive tax scale. This means that those who earn more often pay more in proportion to those earning less. Most countries use income tax for basic government funds such as healthcare, education and infrastructure.
When it comes to the history of income tax, it is interesting to note that the concept is relatively new one. Although different taxes have been part of the human history since the earliest of times, tax on income has been a relatively new invention.
For instance, in the US the first income tax was imposed during the War of 1812, as a method of repaying the debt incurred through was-related expenses. When the war ended, the tax was repelled, but income tax became a permanent fiscal tool in the early 20th century.
You can find out more about income tax from the video below:
Differences in income tax around the world
As mentioned above, the income tax systems around the world can vary somewhat, but there are certain similarities as well. Here’s a quick look at the similarities and differences around the world.
Most countries define income broadly as a tax for residents and non-residents of the jurisdiction typically don’t need to pay tax on income. There are some differences and countries have dealt with issues on
The IRS has a long history of enforcing various form of taxes and a variety of regulation in the United States of America. In fact, federal agencies such as the Bureau of Alcohol, Tobacco and Firearms began as part of the IRS before separation onto its own agency. Below is a brief timeline of the origins of the IRS and subsequent events that transformed it into the agency it is today:
The arguments regarding federal progressive income tax has been represented to us through the United States Supreme Court, on the floors of congress, and in media. The revenue from taxes reached the objective of financing wars from the Civil War through World War II. At the same time deteriorating the economy with fewer dollars that could be used on imports, exports, and services (Henchman). Today, the United States deficit is $18,800,241,350,538.12 this is a grand total of 58,405.32 owed by every man, woman, and child (Brown). The legal illusion is presenting the question, is income tax legal? There are Americans today who believe income tax is not legal and stand by their beliefs in a movement that has cost many individuals considerably. I am interviewing such a person, his name is Bobby Ray and the history he presented to me was interesting, and has left me with more questions than answers.
The top 1 percent of the wealthiest people in the U.S. pay a total of over 40 percent of all federal income taxes, which is more than the entire bottom 95 percent of all tax payers. Government programs are funded through Social Insurance Taxes that are the fastest growing source of federal income though it’s actually counted separately in special trust funds by the Treasury. Both federal and state governments combine these taxes that are used to pay for social programs such as social security, Medicare, and unemployment services. This type of taxation is a regressive tax, since lower income people end up paying more from their income than those with a higher income. Another federal tax is the excise tax, better considered a luxury tax for non-necessities, which include things like liquor, cigarettes, gas, and highways. Taxes that are imposed on imported goods so that there’s less foreign competition on the domestic market are called customs duties.
The Revenue Act of 1862 is the first instance of income tax in America. It imposed a progressive income tax rate on Union citizens in order to raise money for the war effort against the Confederacy. http://money.howstuffworks.com/personal-finance/personal-income-taxes/income-tax.htmThe income tax was abolished in 1872, declared unconstitutional in 1895, and then passed as an amendment in 1913.http://www.archives.gov/publications/prologue/1986/winter/civil-war-tax-records.html Cite everything above! The 16th amendment states “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.” (YOU NEED
The first proposal to impose an income tax on Americans occurred during the War of 1812. After two years of war, the federal government had accumulated a whopping $100 million of debt. To fund the war against Britain, the government doubled the rates of its major source of revenue, customs duties on imports, which obstructed trade and ended up yielding less revenue than the previous lower rates. At the height of the war, excise taxes were imposed on goods and commodities, housing, slaves and land were taxed. Finally when the war ended in 1816, these taxes were abolished. A high tariff was then passed to retire the accumulated war debt. Thankfully, the notion of an income tax was conquered (Young, 2004). However, the thought of the income tax reappeared as an idea to fund the Union armies in the war to prevent the secession of the Confederacy. The war was expensive, costing on average $1,750,000 a day. Struggling to meet these expenses, the Republican Congress borrowed heavily, doubled tariff rates, sold off public lands, imposed a maze of licensing fees, increased old excise tax rates and created new excise taxes. But none of this was enough to fund the debt (Young, 2004)..
For example, if the tax rate is seven percent and one person makes one thousand dollars they would pay seventy dollars to the government. While someone that only made one hundred dollars would pay seven dollars to the government; this they may deem unfair.
In 1861, Lincoln levied the first federal income tax by signing the Revenue Act. Needing cash with which to fund the Civil War, Abraham Lincoln and the Congress agreed to impose a 3 percent tax on annual incomes over $800.00. The wording of the Revenue Act was broadly written to define income as a monetary gain derived from any kind of property, or from any specialized trade, employment, or vocation carried on in the United States or elsewhere or from any source whatever. (A&E Television Networks, 2014)
Tax reforms started in 1916 when the Wilson administration decided to cooperate with a group of insurgent democrats on war time financing, which was majorly progressive taxation. This was important because it led to attacking the wealthy, special privilege, and public corruption. The administration embraced this taxation as “means to achieve social justice.” Another major element to Wilsons administration was redistributional taxation. This helped drive between socialism and unmediated capitalism. The major debate at the time was over the question, “ What stake does society have in corporate profits?” The debates outcome created “soak-the-rich” income taxation. Wilson signed the Revenue Act of 1916. This was the first tax on personal incomes.
In 1861, Lincoln levied the first federal income tax by signing the Revenue Act. Needing cash with which to fund the Civil War, Abraham Lincoln and the Congress agreed to impose a 3 percent tax on annual incomes over $800.00. The wording of the Revenue Act was broadly written to define income as a monetary gain derived from any kind of property, or from any professional trade, employment, or vocation carried on in the United States or elsewhere or from any source whatever. (A&E Television Networks, 2014)
The initial income tax sparked a debate that has raged ever since. "The Government taxed personal income for the first time in 1862,
The main topic of this research paper is taxation. Seeing that this topic is pretty open, I’ve chosen to write about the proposed idea of Fair Tax. Along with a little bit of insight on Fair Tax and a couple highlights of history, I’ll try and explain some pros and cons as well as give my opinion on the topic.
Taxation is an issue that has plagued the United States even prior to the founding of the
Yes, an income tax taxes a person who makes more money a higher amount that a person who makes less which makes it seem fair, but is it really? Let’s take a look at who is actually taxed with an Income Tax versus a Sales Tax. With an income tax the only people who are being taxed are the people who legally have an income. A sales tax taxes everyone who buys things. There is a lot of people who have found ways to slip through the cracks and get paid an under the table or off the books. By getting their income in this way, they avoid having to pay an income tax. Is it fair that they can make just as much money as someone who get their income legally, but not have to pay a penny in taxes on it? That is how a sales tax is more fair than an income
In addition to economic issues, taxation is also a political issue. Political leaders formulate tax policies to bring reforms in the taxation system in order to promote their agendas. The major tax reforms include: increasing or decreasing the tax rate, imposing new taxes on certain products and changing the definition of taxable income. It is evident from the research studies that no one deliberately wants to pay taxes. U.S’ tax policy reflects expression of influence - i.e., those who have power are successful in paying low taxes and their burden is shifted to people who have no power. Therefore retired individuals, small business owners and farmers find ways efforts to reduce their tax burden. Since its existence, tax policy has been enormously used for promoting political and economic agendas.
Taxation systems are usually modeled in such a way that they take into consideration the social welfare of the citizens. The government and other policy makers have the responsibility of ensuring that the system takes into account the needs of the citizens. The bottom line is that taxation should foster equal distribution of resources. The rate of taxation is usually arrived at after several considerations have been made. The rates are not fixed as they depend on the various economic changes. The issue of how taxation should be distributed among the different economic classes is yet to be addressed.