Tuesday, April 15, 2008

Happy Tax Day!

Unless you're a vampire and have been around for 3,864 years, paying your taxes today feels inevitable. The federal government didn't always levy income taxes, though; until the Civil War, the government was funded completely by tariffs on imported goods. An income tax was created to fund the Civil War, but was rescinded in 1872. Federal income taxes as we know them didn't begin until 1913, with the ratification of the Sixteenth Amendment.

If, like me, you end up owing something every year, April 15 can be depressing indeed. Here are a few tidbits to cheer you up. Today, the tax rate tops out at 28%, and with deductions and the lower rate on capital gains and dividends, the wealthy among us pay less tax than ever. In 1916, the income tax wasn't progressive, and was instead a flat 1% on incomes between $3,000 and $500,000, with a surcharge of 6% for incomes over $500K. Tax rates increased and became progressive by 1918 to finance WWI, then decreased again during the 1920s, with the top rate bottoming out at 24% just before the crash.

Anyone lucky enough to be earning money during the Great Depression was taxed heavily on it, with the top rate reaching 63% by 1932. To finance WWII, the rate went even higher, to 94% on incomes over $200,000. The top rate stayed at around 90% until 1964, when it was lowered to 70%. It wasn't until Reagan's economic policies came into effect in the 1980s that the rates decreased to the levels we now all know and love.

We're not all rich, of course, and the tax rates for the middle-class haven't fluctuated as much as taxes on the wealthy. I'm glad I'm not taxed 90% of my income, but then again I doubt my income would have put me in that bracket. The total tax burden for most Americans, combining federal, state, and local or municipal taxes, is 40%. Look at all we get in return: chaos in Iraq, bailouts of troubled lenders, and $600 a person to spend at Wal-Mart.

Too bad we no longer impose tariffs on all that Wal-Mart merchandise that's been made in China.

1 comment:

tunsie said...

while marty prepared my taxes we had a satay with asian pumpkin and prawns which was spicy.we also had some yum cha dumplings with vegetables,some with fish. I am not allowed 2 shop at wal mart thank u.I shop in downtown when I could.tunsie.tunsie.tunsie