History of American Taxation (1894 – 2010): America’s Income Tax 2

With the 16th Amendment solidifying the federal government’s ability to withhold taxation revenues, the income tax was here to stay. It was re-issued in 1894 as a one percent tax on incomes greater than $3,000, and a six percent surtax on incomes greater than $500,000. From this year forward, the top bracket income tax bracket has never been that low again:

In 1918, the top rate was 77% in order to pay for World War One. The government decreased the rate to 58% in 1922, and then to 24% in 1929. Surprisingly, the rate reached 63% during the Great Depression, and then was increased to 94% during World War Two. According to Wiki (be nice), President Franklin Roosevelt tried to increase the top bracket’s rate to 100% (on all incomes above $25,000) while Congress attempted to enact “payroll withholding.” The rates never left 90% too far until President Kennedy lowered it to 70%. The government lowered the rate again to 50% in 1982 and then to 28% in 1988 during the Reagan Administration. During the Clinton years, the rates hovered around 39% until they were lowered by the Bush administration to 35%, but that rate is set to expire in 2011.

At the present, according to the IRS, the top 0.1% of taxpayers pays 17.4% of federal income taxes, and the top 5% of taxpayers pays 57.1%.

Even though the federal income tax now represents the largest contributor to the monetary resources of the federal government instead of tariffs, taxation is more often than not used as a political tool to accomplish certain tools other than accrue fiscal resources. For example, the tax law can be rewritten to encourage consumers into purchasing certain goods or services, or to disincentivize people from engaging in certain economic activities.

Generally speaking, the American tax system is “progressive”, meaning that those with higher incomes respectively are required by the system to pay a higher percentage than those with a lower income. The system divides certain income levels into “brackets” that then determine at what rate that wage-earner pays his taxes.

However, why have a progressive tax system? What exactly is a progressive tax system? More on this in my next blog!

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Chris Buchheit

Chris Buchheit was born under the hot Floridian sun during some year in the 1980s. There he studied school matters until moving to North Carolina in 1999. Possibly due to the fact that his mom had enough of him being inside all the time, he quickly got involved in community affairs via the Boy Scouts of America, where he learned the values of citizenship, morality, duty to God and country, and that the biggest kids get to boss around the smaller ones. Chris attained the rank of Eagle Scout in 2004, and still values the rank as one of his proudest achievements. Beginning in 2006, Chris began attending the University of North Carolina at Chapel Hill, where he quickly learned the value of basketball and poplar trees. Since attending UNC, Chris has been double majoring in Asian Studies, with a concentration in Chinese, and Political Science. When he isn’t slaving over his honors thesis, looking up a bunch of Chinese Characters, volunteering, or mindlessly browsing the same websites over and over, Chris enjoys writing short stories and novels. Much to his roommates’ annoyance, he also spends his free time learning to play the guitar. Above all else, though, Chris values God, his family, and his friends. For the future, Chris plans to apply to Georgetown to further his studies in Political Science, hopefully with a concentration on China. Pending acceptance into Georgetown, Chris would like to study while gaining professional experience in a government job in Washington DC.

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