Light Reading, Anyone? U.S Tax Code: 4 million words

Jul

13

Light Reading, Anyone? U.S Tax Code: 4 million words

“The hardest thing in the world to understand is the income tax.” – Albert Einstein

 Social security tax. Income tax. Property tax. School tax. Do we really know the history behind why we pay taxes? If we have to pay them, we may as well know why, and for what!

We all know that the two certain things in life are death and taxes. But do we really know the history behind why we pay taxes? If we have to pay them, we may as well know why, and for what!
Sugar, Liquor, and Tobacco

Income tax started just after the Revolutionary War ended in 1783. With coffers depleted, government leaders in the U.S. decided to collect revenue through tariffs and duties on certain items, such as liquor, tobacco, and sugar. This notion was challenged by a group of farmers from Pennsylvania who were upset about the tax on whiskey; they burned down tax collectors’ houses. Congress resorted to military force to put a stop to the farmers’ actions.

War and Taxes

In order to help pay for the American Civil War, Congress passed the Revenue Act of 1861. The need for cash to cover World War I led to three Revenue Acts that cranked up tax rates and lowered the exemption levels. The number of people paying taxes in the U.S. increased to 5%, and separate taxes were introduced for estates and excess business profits. These taxes were rolled back following the war in five phases, and the economy experienced a huge boom. Government tax receipts reached $3.6 billion in 1918, the last year of the war. Despite lowering taxes, the government take reached $6.6 billion in 1920. The crash of 1929 and the financial fallout saw these revenues fall to $1.9 billion by 1932.

Where Do Our Taxes Go?

So, how does the federal government divide the taxes we all pay? About one-quarter of all taxes pay for programs like Medicare and Medicaid, while 24% goes towards Social Security. Defense programs get 16%, and benefits for federal retirees and veterans get 8%. The rest goes towards interest on the national debt, education, transportation infrastructure and science/medical research.

How Many Taxes Are There?

Taxes today include everything from building permits to cigarettes to fishing, marriage, and telephones.

Here’s a sample of taxes we pay today:

  • Accounts Receivable
  • Building Permit
  • CDL license
  • Cigarette
  • Corporate Income
  • Dog License
  • Excise Taxes
  • Federal Income
  • Federal Unemployment
  • Fishing License
  • Food License
  • Fuel Permit
  • Gasoline
  • Gross Receipts
  • Hunting License
  • Inheritance
  • Inventory
  • IRS Interest Charges IRS
  • Penalties (tax on top of tax)
  • Liquor
  • Luxury
  • Marriage License
  • Medicare
  • Personal Property
  • Property
  • Real Estate
  • Social Security
  • Road Usage
  • Recreational Vehicle
  • Sales
  • School
  • State Income
  • State Unemployment
  • Telephone Federal Excise
  • Telephone Usage Charge
  • Utility
  • Vehicle License
  • Registration
  • Vehicle Sales
  • Workers Compensation

 

 

No Taxes? What Would Happen Then?

It’s more like ‘what would NOT happen.’  We may not realize the services and programs that our taxes are paying for. If taxes didn’t exist, here’s a snippet of what we’d be looking at:

  • No public schools.
  • No fire service.
  • No road repairs.
  • Fewer charitable organizations.
  • No welfare or Medicaid.

And that’s just the start.

So, even though we dread April 15 every year, or seeing the FICA line in our paychecks, taxes are necessary to pay for programs that some of us want, some of us need, and quite frankly, some of us can’t live without.

We promise we won’t share a history of taxation with you. We just want to make your life easier and prepare your taxes. Give us a call today.

 

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