Tax Day 2015

On April 15th, Americans who work are required by law to file tax returns. Popularly called “Tax Day,” no dread this day. Before midnight on April 15th, you may see long lines at the post office, as procrastinating Americans rush to drop off their tax forms. Failing to file tax returns is a crime and punishable by fines. Before 1913, however, this annual ritual did not exist. The federal government was not allowed to collect individual income taxes. Only state governments could tax individual income. 

On February 3, 1913, the 16th Amendment was adopted. The 16th Amendment to the Constitution allows Congress to lay and collect taxes on income. Before this amendment, the U.S. government collected revenue primarily from customs duties and excise taxes. Customs duties are fees placed on companies that import products from out of the country. Excise taxes are taxes that a producer has to pay on a specific product that he sells.

Many of the founding fathers did believe in taxes, but unlike today’s politicians, they believed that taxes should be greater on the poor. Benjamin Franklin wrote that the poor should be taxed higher to give poor people greater incentive to work out of their poverty. This view was shared by Thomas Jefferson, James Madison, George Washington, and John Adams.  (See Benjamin Franklin, On the Price of Corn and Management of the Poor, 1776).

The American Founding Fathers disagreed on whether the federal government or the state governments should have more power in taxing incomes. During the Constitutional Convention, the delegates agreed that the federal government should not have control over taxing individuals’ income, because it would be a power they could easily abuse. Any tax on income would not reside in the federal government.

Popularity of income tax and graduated taxes increased during the second half of the 1800s. A graduated tax is one where individuals pay a higher percentage, depending on how much money they make. The first tax on income was introduced by the U.S. Congress during the American Civil War, in the Revenue Act of 1861, and later, in 1862. The Civil War taxes ended in 1872. During the decade of the Civil War, and after, the Socialist Labor Party and the Populist Party advocated a graduated income tax. These political parties believed that those with higher incomes should pay more. 

Since 1913, Americans have paid the federal government taxes on their income.  The tax has been a graduated one, with high earners paying a higher percentage of their income. There are a number of debates regarding federal taxes.  The following are just some of the questions Americans discuss:

1.       How high should there be taxes on federal individual income?
2.       Should federal individual income taxes be flat? This means, should everyone pay the same percentage of their                     income for federal taxes?
3.       Should federal individual income taxes be graduated?
4.       Do federal income taxes hurt America’s economy?
5.       Are fees that the government collects actually taxes?
6.       Should tax collection by the federal government be redistributive? This means, should the federal government take                from one part of society to give to another part?
7.       When are federal taxes too high?
8.       Why does no one ever discuss abolishing the 16th amendment that was established in 1913? 
9.       Should all people pay federal income taxes, regardless of their income?
10.     Should Americans receive money from the federal government, if they do not earn a certain amount?