Taxation and American History
Taxes are compulsory levies imposed by governments. They are used to fund government expenditures and have a variety of justifications.
Taxes are levied on physical assets and specific events, such as a sales transaction. They have been a mainstay of civilization since ancient times. The American struggle for independence began over taxes imposed by Britain.
One of the most important aspects of American society is taxation. Individuals must pay taxes at the federal, state and local levels. This money is what keeps our society running and enables it to function every year. The modern tax code is very complex and includes hundreds of laws and thousands of pages. Taxes are also often at the center of major historical events.
In 1765, colonists revolted against the British over their use of taxes. This was due mainly to “taxation without representation,” in which the British required legal documents, including newspapers, permits, commercial contracts and playing cards, to be stamped.
In 1862, President Lincoln signed a bill to institute the United States’ first income tax. The new law imposed a 3 percent tax on incomes between $600 and $10,000 and a 5 percent tax on incomes above that. This was a progressive tax, meaning it took a higher percentage of the wealthiest citizens’ income than the poorest.
Taxation provides a form of government revenue, providing the resources necessary to fund programs and activities that would not otherwise be available. This function is distinct from extortion and protection rackets in that it is legal, and because taxes are imposed by a democratically elected entity rather than a private actor.
In addition to financing government expenditures, taxes also play a critical role in economic policy by encouraging savings and investment. In the modern world, governments use a variety of taxes to raise revenue, including excise taxes (on items such as cigarettes and gasoline) and sales taxes.
Taxation in the United States has taken many forms over the centuries, from colonial protests against British taxation policies to sky-high rates for war funding. Today, Americans pay a wide array of federal and state taxes, including income, excise, estate, and Social Security taxes. This visualization reveals the history of these levies and how they’ve shifted over time.
Throughout the centuries, taxation has taken on many forms. In ancient Egypt, for instance, 20 percent of grain harvests were collected and turned over to the Pharaoh as a form of taxation. The Greeks then borrowed this concept as they expanded their civilization. During the American Revolution, people were hesitant to adopt a direct taxation system, so they instead collected taxes through tariffs and duties on goods such as liquor, tobacco, sugar, and legal documents. After the Civil War, property taxes became a key source of state government revenue, eventually being surpassed by sales and income taxes. Today, the federal income tax provides a significant share of the nation’s funding for social programs such as Medicare and Social Security. It also generates other important revenue sources such as capital gains and qualified dividends.
Joseph J. Thorndike examines contemporary skeptical reactions to President Jimmy Carter’s tax reform talks, contrasting them with the initial response to the 2021 leak of wealthy taxpayer information and the 1973 disclosure of President Nixon’s personal taxes. He also looks at how governments shape the lives of their citizens through excise taxes such as those on booze and tobacco, as well as through income taxes like the form 1040 that came into existence with the passage of the 16th Amendment in 1916.
The Constitution grants Congress the power to tax its citizenry. In the early 19th century, President Lincoln introduced the nation’s first income tax in order to fund war efforts. The constitutionality of the tax was debated until it was ratified in 1913 by the 16th Amendment. Today, the federal government levies several specific taxes including a flat tax on income, Social Security, and Medicare. In addition, states have a variety of sales taxes and property taxes.