Taxes are one of the most discussed items here at White Oaks. We spend time strategizing with clients for upcoming years and identifying ways that we can make sure we are helping our clients achieve their tax goals. Have you ever wondered, though, how this all came to be? Are you curious about the history of U.S. taxes?
We wondered the same thing. The Boston Tea Party is taught in history class; how it helped launch the Revolution. We are taught that the colonists demanded representation if they were to be taxed. What happened then? How did we get to where we are now? What does the history of taxes in America look like?
Wars and Money
The level of taxation has fluctuated throughout our history as a nation. When funding was needed for wars there has, historically, been additional taxation. It’s no surprise, given that defense is one of the largest expenditures for the government. In FY 2019 the Department of Defense’s budget request was $686,000,000,000! Coming out of World War II, for example, the top tax rate was 94%! However, there was a smaller tax base as fewer Americans had income tax liabilities in those years.
You’ll note that the first time that taxes surpassed the one billion dollar mark was 100 years ago. With inflation, that one billion would be worth about $16.6 billion today. That’s a much littler number than the approximately $3.4 trillion that was taken in by the IRS in fiscal year 2017. Granted, the IRS issued refunds of $437 billion on that intake. Indeed, even with that large inflow, according to the Tax Policy Center, US income taxes are relatively low when compared with other developed countries.
This April, in the height of tax season, we thought it would be fun to take a walk down memory lane of bygone years of taxation. Check out our timeline of major tax milestones in the history of U.S. taxes. While it is not fully comprehensive, as the tax code has grown in length and complexity over the years, it hits some of the high points and illustrates where we are, where we have been and perhaps, where we are going. Enjoy!
Sources: https://www.infoplease.com/business-finance/taxes/history-income-tax-united-states, https://www.investopedia.com/articles/tax/10/history-taxes.asp, https://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2019/FY2019_Budget_Request_Overview_Book.pdf, https://www.irs.gov/statistics/soi-tax-stats-irs-data-book