History of the U.S. Income Tax Essay Example for Free

History of the U.S. Income Tax EssayThe income levy of the United States of the States, be it federal, evidence and local, has changed over time. Different circumstances pushed the disposal to create evaluateation and to amend the existing value revenueation laws. During the pre-Revolutionary state of war era in the 1700s, assesses were not compel by the colonial political relation as their need for impose revenue did not exist. The colonies, on the other hand, had greater responsibilities therefore, had greater need for tax revenue.Because of this, different types of taxes were enforce by the colonies. The southern colonies enforce taxes on imports and exports while the middle colonies overthrowd taxes on property and a poll tax on each adult male. The New England colonies, on the other hand, collected taxes finished property taxes, income taxes and happen upon taxes. When the English Parliament realized the need for money to pay for the French war, it imposed d ifferent taxes to the American colonies through the Stamp flirt which was enacted in 1765.Later on, this Stamp Act was rewrite to include taxes for permits, newspapers, legal documents and playing cards. The Townsend Act was later on enacted by the Parliament to include taxes for paint, tea leaf and paper . After a decade of paying taxes, there was much resistance to the tax imposed by the Parliament. During the Boston Tea Party in 1773, colonists, dressed as Native Americans, threw 342 chests of tea from a ship of the British East India Company to the Boston Harbor.In 1775, Isaac Backus during the Massachusetts Assembly said that Its not all America now appealing to Heaven against injustice of creation taxedWe are persuaded that an consummate freedom from universe taxed by civil rulersis not mere favor from any men in the world but a right and property granted us by God, who commands us to bristle fast in it . Taxation is considered as one of the factors that conduct to Ame rican state of war for Independence therefore, when America gained its Independence, Article 1, Section 9, Article 4 of the U. S. Constitution in 1787 declared that there be no capitation or any direct taxes imposed on the citizens.The national government had very little responsibilities during these time and relied only if on donations given by the States for its revenue. However, in 1789, the Founding Fathers realized that it could not function at its efficiency if it relied only on other governments donations hence the Federal Government was granted the authority to impose taxes. The sensitivity to taxation was still existing at this point in time hence the government has to be careful on how it impose taxes so as to minimize resistance from its people.Alexander Hamilton, depositary of the Treasury in the 1790s, decided that a sin tax was imposed . Through the sin tax, only items which society thinks is deviant or vice were taxed such as distilled spirits, alcohol and whiske y. However, this still led to the armed revolt called Whisky Rebellion by a group of South Pennsylvania utmostmers. stable during the 1790s, the Federal Government imposed direct taxes to owners of houses, slaves and land. However, when Thomas Jefferson was elected to office in 1802, these direct taxes were distant and for the succeeding 10 years, only excise taxes were imposed.The reason for this was because he realized the inverse relationship of tax order and tax revenue wherein the higher the taxes imposed on the citizens, the slower the economy grows hence the tax revenue declines. A deoxidize in the rate of tax means that income for the family will pay back higher, expenditures become higher and hence, the economy experiences growth. During the 1812 fight, the need for tax revenue resurfaced again hence taxes on the gross revenue of gold, jewelry, watches and eloquent were imposed. Treasury notes were also issued to raise money.However, in 1817, the relation back revo ked these taxes and for the next 40 years, government revenue was base on high customs duties and sale of government or public land . In 1861, when the well-bred War erupted, the Revenue Act of 1861 was enacted. This Act restored the previous taxes on individualal income. This tax was similar to the mod income tax because it was based on a gradual taxation of withholding tax from its source. A person earning $600 to $10,000 a year remunerative 3% tax. Persons with income higher than $10,000 paid a higher rate of tax.In 1862, the debt created by the war was rising at a rate of $2 one million million million per day hence there was another need for the government to increase its revenue. Because of this, the Congress passed another tax imposition on items such gunpowder, playing cards, telegrams, iron, pianos, yatchs, drugs, among others. After the Civil War, the need for revenue declined and hence the income tax was abolished and only the excise taxes remained from 1868 to 1913 . The War Revenue Act in 1899 was enacted to raise funds for the Spanish-American War.Government revenues, thru this Act, was raised through sales of bonds, tax imposition on recreational facilities, beer and tobacco. However, the Supreme Court realized that the people of America were nice aware that the high tarrifs and excise taxes were not good to the economic welfare of the nation and that these taxes were usually paid by the less affluent citizens. Hence, there was an agreement that business income instead was imposed tax. By 1913, Congress enacted a new income tax law which imposes 1% to 7% for persons with income above $ergocalciferol,000.These people earning above $ vitamin D,000 was only 1% of the total United States population . During World War I, the United States needed to increase its revenue again to fund the war. The 1916 Act raised the tax imposition from 1% to 2% and could go as high as 15% for those with income of more than $1. 5 million. By 1917, the government still needs raise government revenue to pay for the war, hence the War Revenue Act of 1917 was enacted. Through this Act, exemptions were lowered and tax pass judgment change magnitude that those who earn $40,000 needs to pay 16% tax rate.In 1918, the tax rates were further increased. Those citizens paying 1% had to pay 6%. The highest rate in 1917 was 15% but during 1918, this was increased to 77%. Due to this increase in tax rates, government revenue increased from $761 million during 1916 to $3. 6 billion in 1918. After the war, the government revenue rose and the government decided to cut taxes to 1% hind end rate and 25% top rate . The Great Depression during the late 1920s and azoic 1930s pushed the government to once again increase the tax rates.The Tax Act of 1932 was enacted and by 1936, the bottom tax rate was at 4% and the top tax rate reached 79%. When the World War II came, another price hike came into place which modify the tax rates. Those with taxable income of less than $500 paid a bottom rate of 23% taxes while those earning taxable income of over a million dollars paid about 94% of taxes . The tax structure in the United States was also heavily altered in that the number of taxpayers increased from 4 million during 1939 to roughly 43 million during the World War II.Throughout all these years of implementing taxation, the government learned a very important lesson which until now is being valued by government officials and economists and has affected the tax laws enacted in the country the marginal dollar is far more important to the economy compared to the tax rate being used. The Economic Recovery Tax Act of 1981 was implemented with this important lesson in mind. Unlike the previous taxation laws, this Act was intended to focus on marginal tax rates and it also included consumption taxes.However, due to the deep recession see by the country in 1982, the government was once again faced with the need to increase tax rates to overcome budget deficits. Following the 1982 recession was an economic boom which lead the country to commit that marginal tax rates are very important for a strong economy. During the Reagan administration, tax rates were further reduced and had a broader base through the Tax Reform Act of 1986. This reduced tax rate from 50% to 28% while business taxes were reduced from 50% to 35% .In 1997, the Taxpayer relievo Actof 1997 was enacted. The significant party of this Act was the Per Child Tax credit which benefited the lower-income families. During the Bush administration in 2001, the government experienced a budget surplus of about $281 billion hence a tax cut was once again conducted . This tax cut included raising the Per Child Tax Credit from $500 to $1,000 per child, as well as increased the Dependent Child Tax Credit. Until now, this tax law is being implemented and is expected to boost economic growth for the country.