The federal income tax started small just
99 years ago (in 1913), but grew quickly in size and scope. The top rate
was first set at a mere 7 percent -- and married couples were only taxed
on income over $4,000 (about $90,000 in today’s dollars). During the tax
debate, Congressman William Shelton of Georgia supported the income tax
“because none of us here have $4,000 incomes, and somebody else will have
to pay the tax.” Sounds just like that famous line, “Don’t tax you, don’t
tax me, tax that man behind the tree.”
Tursday, October 04, 2012
The income tax -- 99 years
later
Lawrence Reed Columnist
This column was written before Wednesday night’s presidential debate, but
it’s safe to assume that taxes -- income taxes in particular -- were part
of the circus. Rates are set to rise painfully in January if Congress
doesn’t act beforehand so we’ll all be talking a lot about taxes in the
next few months. A little history could be useful.
The federal income tax started small just 99 years ago (in 1913), but
grew quickly in size and scope. The top rate was first set at a mere 7
percent -- and married couples were only taxed on income over $4,000
(about $90,000 in today’s dollars). During the tax debate, Congressman
William Shelton of Georgia supported the income tax “because none of us
here have $4,000 incomes, and somebody else will have to pay the tax.”
Sounds just like that famous line, “Don’t tax you, don’t tax me, tax that
man behind the tree.”
Some people scoffed at the notion that the income tax would ever take as
much as 10 percent of anybody’s money, but it took the politicians barely
20 years to sharply increase the rates and expand the base of those who
had to pay it. Presidents Herbert Hoover and Franklin Roosevelt, using
the excuses of depression and war, permanently enlarged the income tax.
Under Hoover, the top rate was hiked from 24 to 63 percent. Under
Roosevelt, the top rate was again raisedfirst to 79 percent and later to
90 percent.
In 1941, in fact, FDR proposed a 99.5 percent marginal rate on all
incomes over $100,000. After that proposal failed, Roosevelt issued an
executive order to tax all income over $25,000 at the rate of 100
percent. He also promoted the lowering of personal exemptions to only
$600, a tactic that pushed most Americans onto the tax rolls. Congress
rescinded Roosevelt’s executive order, but it approved the personal
exemption reduction.
The progressive income tax allows politicians to protect friends, punish
enemies and to tax one small group to give benefits to larger targeted
groups. In the 1920s, Sen. James Couzens of Michigan said, “Give me
control of the Bureau of Internal Revenue, and I will run the politics of
the country.”
When President Nixon discussed who he wanted as Commissioner of Internal
Revenue, he said, “I want to be sure that he is ruthless, that he will do
what he is told, that every income-tax return I want to see, I see; that
he will go after our enemies and not go after our friends. It’s as simple
as that.”
Today, though rates are lower than their all-time highs, the paperwork is
massive and incomprehensible. Add the value of the time we spend on
filing it all and worrying that we got it right and you know why Ronald
Reagan once defined what a taxpayer was this way: “Someone who works for
the federal government but doesn’t have to take the civil service
examination.”
http://www.times-herald.com/opinion/op-ed/reed/20121004Lawrence-Reed-Thurs-MOS
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