The United States Tax System

Because the U.S. does not have a Parliament, Congress is in charge of levying taxes, not the president. The enumerated powers, which can be exercised by Congress, are powers that are granted by the Constitution. The enumerated powers begin by stating: “To lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States.” As the U.S. grew and as a requirement all states, they had to have an income so all of their residents could be provided the common good.

1862 - President Lincoln signed into law a revenue-raising measure to help pay for Civil War expenses. The measure created a Commissioner of Internal Revenue and the nation 's first income tax (Internal Revenue Service, 2013).

As shown in document 1, Congress held no power to tax, this quickly became a big problem for the government as they were broke. Being without money meant that even if they tried to propose a tax, there were no repercussions for not paying. In 1786, a group of farmers in Massachusetts decided that they were going to revolt against the government and attempted to shut down the courts. This was called Shay’s Rebellion as it was led by Daniel Shay. Shay was a war veteran riddled with debts and the group's goal was to stop the imprisonment of citizens with debt. Document three is a depicts a rebel fighting an official and a letter from George Washington to James Madison saying, “Will not the wise and good people work hard to prevent this evil?” Technically, there could be taxes but no one would listen, they did not have to if the government could not do anything about it. Farmers were angry with high taxes and refused to pay. The Articles of Confederation dug America into a whole because after the war; the nation needed astronomical amounts of money to pay back other countries who had helped out with artillery and supplies but the government set taxes too high and people simply refused to pay. Document 2 correctly summarizes the problems faced by the Americans. It is a ship labeled Articles of Confederation in

Also in limbo was taxation and debt. Debt after the war was grew to a point that some industries and states were more than three times the annual income of said industries; such was the case of the Tobacco trade.

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)..

The Articles of Confederation was the first constitution of the United States. This constitution was used from 1781 until 1789. While writing this document, the founders still had a fear of central authority after the American Revolution. Because of this fear, our first constitution had many weaknesses. Our country was still very afraid that too much power given to the central government would turn into a similar situation like they faced with Great Britain.

The origin of the income tax on individuals is generally mentioned as the passage of the 16th amendment, which was passed by congress on July 2,1909. The history of individual income tax in the U.S.A goes back to 1861. During the civil war, congress passed the revenue act of 1861, which included taxing on personal incomes to help pay the expenses of the war. This tax was repealed after the war. In 1894, congress made a flat rate federal income tax, but the U.S Supreme Court ruled it unconstitutional. During the following

This amendment played a central role in building up the powerful American federal government of the twentieth century by making it possible to enact a modern, nationwide income tax. The income tax became by far the federal government’s largest source of revenue. The sixteenth

With the growing numbers of men used, how was this ever so expensive war funded and paid for? In comes the introduction of national taxes, only accompanied by the growth of a nation state on both sides. However, the Confederate states were much more ready to lean to taxing their citizens. It is recorded that many types of taxes were implemented including the graduated income tax, license tax on business, sales tax on buying/selling, and a tax-in-kind (this was a form of tax placed on a good or service where no money was involved). The use of taxing to support a war was nothing new; however, the use of taxes on such a grand scale was never witnessed before. What gave the governments the chance to inflict said constraints on the citizens that

The focus of what the government wanted to tax changed over the years, it started with taxing incomes and then moved on to taxing tobacco and distilled spirits and eliminated the income tax in 1872. It had a short-lived revival in 1894 and 1895. In the latter year, the U.S. Supreme Court decided that the income tax was unconstitutional because it was not apportioned among the states in conformity with the Constitution. It wouldn’t be until 1913 that the 16th amendment was passed and added to the Constitution that income tax would become a permanent fixture in the U.S. tax system.

Then there is the Internal Revenue act of 1861, which increased income tax rate. This assured us that the government would have a, “reliable source of income to pay the interest of war bonds” (119). In addition to that, we have the Subsequent Revenue act of 1862 and 1864, which allowed for progressive tax bracket. This act had a tax system that put a tax on everything, for example, medicines, yachts, and etc. The Morril tariff Act of 1860 and 1861 was a reform in which the tax was doubled on items in which customs tax could be collected. Furthermore, the National banking Acts of 1863 and 1864 encouraged people to carry out national currency and national charters. Provision of the 1864, which executed a 10 percent tax on the banknotes of the states. Because the tax base grew by a significant amount a Bureau of Internal Revenue had to be created to control and regulate the tax needs.

The Expansion of military affected that taxes tremendously in the 1900's. The reason for that was because the Americans had many wars going on, in that period and they were preparing for World War 1. They also, have many sections in the military so they

In January of 2005, President George W. Bush appointed a bipartisan committee to propose new income tax policies; they were referred to as the “President’s Advisory Panel on Federal Tax Reform”. The goal of the panel was to advise new options in an attempt to make filing of the United States personal income tax simpler. The made a statement about the difficulty that normal citizens have when filing their tax returns, “For millions of Americans, the annual rite of filing taxes has become a headache of burdensome record-keeping, lengthy instructions, and complicated schedules, worksheets, and forms – often requiring multiple

Congress was unable to collect taxes that were established to pay pre-war debts. This yielded a period of chaos and

The American people are in the presence of the highest tax burden in American history; taxes represent a larger share of the U.S. economy than ever before (Armey 2). After World War II, the average family sent only about three percent of its income to Washington. The same family today gives 24 percent of its income to the federal tax collector (Mitchell 1, 9). Once state and local taxes are added to the federal take, taxes make up the biggest slice of the average family's budget. As Daniel Mitchell of the Heritage Foundation shows in Figure 1, the typical American family now pays more of its budget in taxes than it spends on food, clothing, transportation and shelter combined (Mitchell 1, 10).