Once upon a time, in the ancient land of Mesopotamia, folks paid their taxes in cattle, sheep, and perhaps the occasional goat. Yes, you heard it right, livestock! Imagine trying to fit a herd of cows into an envelope addressed to the IRS. I bet that would give any mailman quite the surprise!
Fast-forward 4500 years, and we find ourselves in the midst of the Civil War. In 1861, Uncle Sam decided he needed more cash to fund the war efforts. So, what did he do? He created the first federal income tax. Not exactly as exciting as discovering fire or inventing the wheel, but hey, it’s history!
This newfound revenue source was short-lived, though. After the Civil War ended, Congress said “nah, we’re good” and repealed the income tax in 1872. But like that ex who can’t take a hint, the income tax came back in 1894 with the Wilson-Gorman tariff. It established a 2% tax rate for anyone making over $4,000. And in case you’re wondering, $4,000 back then is roughly equivalent to $120,000 today.
But, plot twist! The Supreme Court stepped in and said, “Hold up, this isn’t right,” and overturned it in 1895. However, the income tax was like a boomerang that kept coming back. In 1913, the Sixteenth Amendment gave Congress the power to tax personal income. And thus, the modern income tax was born.
In 1914, the Bureau of Internal Revenue (the IRS‘s great-grandfather) introduced us to the Form 1040. This form, much like a chameleon, has changed its appearance almost every year since its inception. And just like a soap opera, it’s been full of drama, suspense, and a whole lot of confusion.
The tax rates have also had their fair share of ups and downs. Starting off as a modest 1% for the bottom bracket and 7% for the top, they reached dizzying heights during World War II with an astonishing top marginal tax rate of 94%. That’s right, folks, 94%! That would make even the richest tycoons clutch their pearls!
Today, our tax code is like a labyrinth designed by a mad genius. It’s filled with forms upon forms, each with its own set of rules and regulations. Whether you’re making money from working nine to five, trading stocks, or running your own business, there’s a form (or three) for you.
So, the next time you’re wrestling with your 1040, remember: it could be worse. You could be trying to pay your taxes in cows!
JoAnna Laiscell, February 13, 2024
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