Beware the Ides of April

For those of us under 100, it’s probably hard to imagine no income tax, yet prior to ratification of the 16th Amendment in 1913, there was no income tax as we know it today.

Actually, Congress tried twice before:

  • To pay for the Civil War, an income tax was implemented in 1862. Rates ranged from 3% to 10% on incomes above $14,000 (in today’s dollars). This was repealed in 1872 but was replaced with a “sin tax” on alcohol and tobacco (still in force today).
  • The feds tried again in 1894 (2% on incomes above $100K), but the Supreme Court ruled it unconstitutional in 1895. There was no income tax for the next 18 years (imagine that!).

Since the 16th amendment, there have been widely disparate rates and brackets:

  • 1913-1917: top rate of 7% on incomes above $500K
  • World War I:  top rate escalated to 77% (above $1 million)
  • The Great Depression and WWII: rates varied considerably from 24% in 1929 to a record high of 94% in 1945
  • 1960s and 1970s: top rate leveled off in the 70% range
  • 1986: top rate reduced to 50% and many tax shelters eliminated
  • 1987 – 2013: top rates have fluctuated from a low of 28% to a high of 39.6%.

Regardless of where you stand on this perennial issue, what we know for sure is that taxes will always be necessary and unpopular.

photo credit: SunDial 0211 6004 via photopin (license)


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