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Taxed Enough Already: A Brief History of U.S. Taxation

The power to tax is the power to destroy.

by
Larry Greenfield

Bio

April 15, 2013 - 10:12 am

As the American colonial economy grew, the British Crown imposed duties on molasses, rum, sugar, wine, newspapers, legal documents, licenses, and playing cards.

Even more taxes were then imposed on glass, lead, paper, paint, and tea, leading to the Boston Tea Party, resulting in the closing of the Eastern port and imposed British military command.

The American Revolutionary War cry went out: Taxation without representation is slavery!

The founders of the new United States limited federal taxing power. Early 19th century revenue was based on import tariffs and some internal taxes on distilled spirits, tobacco, refined sugar, auctioned property, corporate bonds, carriages, and slaves.

The War of 1812 brought the first sales taxes on gold, watches, jewelry, and silverware.

In 1817, Congress revoked most taxes, with tariffs on imported goods sufficient to run the government.

In 1862, the Civil War effort led to sales and excise taxes, and the nation’s first income tax — with a progressive rate of 3% for most earners. The “inheritance” tax also made its debut, and the commissioner of Internal Revenue was given the power to assess, levy, and collect taxes through seizure of property and income, and prosecution.

Congress eliminated the income tax in 1872. Revived in 1894, the U.S. Supreme Court decided the next year that the income tax was unconstitutional because it was not apportioned among the states in conformity with the Constitution.

In 1913, the 16th Amendment to the Constitution gave Congress legal authority to tax income of both individuals and corporations. The top marginal tax rate was 7% and the entire tax collected was $28 million.

By fiscal year 1918, collections hit the billion-dollar mark, rising to $5.4 billion by 1920.

The withholding tax on wages was introduced in 1943, and the war-time economy increased the number of taxpayers to 60 million and tax revenue to $43 billion by 1945.

President John F. Kennedy cut tax rates, and in 1962 delivered his famous speech promoting low taxes.

In 1981, President Ronald Reagan signed the largest tax cut in U.S. history, and in 1986 he brought the top tax rate on individual income down from 50% to 28%, the lowest it had been since 1916, sparking decades of economic productivity.

President George H. W. Bush, who had famously pledged “read my lips, no new taxes,” came to regret his 1990 budget deal with Democrats that included “tax revenue increases.”

President Bill Clinton cut capital gains taxes for individuals, and provided child tax credits and incentives for education.

In 2001, President George W. Bush saved taxpayers $1.3 trillion over ten years, cutting the top four tax rates (28% to 25%; 31% to 28%; 36% to 33%; and 39.6% to 35%) and creating a new low rate of 10%.

Then came the Affordable Care Act of 2010. Though a tax on individuals based solely on their decision not to buy health insurance is a direct tax on individuals disallowed by the U.S. Constitution, Chief Justice John Roberts controversially ruled that the new healthcare tax is indirect because not everyone will have to pay it.

Obamacare imposes taxes on investment income, medicare payroll taxes, individuals, employers, health insurers, medical device makers, drug companies, medical bills, special needs parents, health savings accounts withdrawals, indoor tanning services, charitable hospitals, and more.

The 2013 Congressional fiscal cliff deal resulted in a rise in payroll taxes to 6.2% (from 4.2% in 2012), hurting all working Americans. The top income tax rates also rose back to 39%.

And the 2013 Senate Democrat and Obama budgets propose roughly one trillion dollars in new taxes over ten years.

Bloated federal spending, a massive national debt, and unfunded liabilities for entitlement programs that Mr. Obama resists reforming promise to keep taxes high on current and future workers. Washington continues to resist a flat tax that would simplify the tax code.

We are taxed on accounts receivable, alcohol, art, birth, books, buildings, cars, clothes, computers, death, dining, education, energy, entertainment, food, fuel, health care, hotel stays, active and passive income, luxuries, marriages, Medicare, real property, recreation, social security, sales, transportation, travel, watercraft, wells, and workmen’s compensation.

Add in local, city, county, state, and federal taxes, and a range of assessments, enhancements, fees, fines, licenses, permits, and tolls.

The massive estate tax crushes family farms and small businesses; that’s taxation even without respiration. Compliance costs for all taxpayers result in lost national productivity.

The U.S. corporate tax rate is the highest among Western economies, stunting economic growth and job creation.

Proposals abound for additional new taxes on carbon emissions, internet sales, vehicle miles driven, land, wealth, savings, financial transactions, and for exit taxes for those departing high tax states and the U.S. for lower tax havens.

The UN wants to impose a global poverty tax on citizens.

Cyprus now grabs savings deposits from account holders. France has raised the top income tax rate to 75%, causing an exodus of earners.

Government avarice has no limits. Former U.S. Chief Justice John Marshall once expressed the fundamental axiom that the power to tax involves the power to destroy. Our greatest economist, Milton Friedman, taught that what we tax, we get less of. He noted that we now have a system that increasingly taxes work, and subsidizes not working.

U.S. Senator Marco Rubio (R-FL) repeats a truism: We need not more taxes, but more taxpayers.

The Tea Party will be back.

Larry Greenfield is a fellow in American studies at the Claremont Institute, and senior fellow of the American Freedom Alliance.

Comments are closed.

All Comments   (18)
All Comments   (18)
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I don't mind the 47% who do not pay taxes. What really chaps my a$$ is that I have to feed the Ba$tards with food stamps and welfare when there is not one word in the Constitution authorizing the Federal Government to perform any Charity or Welfare of any type to people or other nations...
Maybe it is time for the TPP to file a lawsuit against the Federal Government for Involuntary Servitude (Slavery) and push it to the SCOTUS and see what the Stooges have to say about it.... Anybody interested in OUR EQUALITY??
1 year ago
1 year ago Link To Comment
"Congress eliminated the income tax in 1872. Revived in 1894, the U.S. Supreme Court decided the next year that the income tax was unconstitutional because it was not apportioned among the states in conformity with the Constitution."

That is not correct.
A tax on rent and other income from properties and a tax on interest from state and municipal securities and a tax on dividends derived from such was declared a direct tax and so had to be apportioned, but the basic income tax on ordinary wages was not declared unconstitutional.
1 year ago
1 year ago Link To Comment
I think that limiting the size of the federal government is the only way out of this mess. Limit its size to 10% of GDP with a minimum of 5% of GDP to go to the military. Any variation would be by supermajority 2/3 + 2/3 and only last one year. Target year 2150 as the 10% year and we'd get there gradually. The States would reclaim their proper place in the political scheme of things.

That and have a one-year sunshine amendment to the constitution stating that all bills (except emergency supermajority bills) would have to wait one year after introduction before the Congress could vote on them.
1 year ago
1 year ago Link To Comment
Mark,
My mom when she was alive used to tell me,what it was like after the depression hit 1929.Her own dad said;Goverment told people that taxes would never go above a certain small percentage.So basically they've been decieve us for ages now.Why can't anyone be truthful with us?My brother&his wife have 4 girls&they don't know how they are going to pay taxes in 2013.Liz Obama doesn't care that as a nation were crumbling.
1 year ago
1 year ago Link To Comment
May I respectfully suggest you look at the historic tax rates and then do a little adjustment for inflation. Then consider that NOBODY pays the tax "rate" as legislated -- then adjust for inflation back 'down' to any given year you'd like. Economics and tax data are the most popular political things that so many like to misrepresent to benefit their causes.
1 year ago
1 year ago Link To Comment
Mark -- We've been at nearly the exact place before in our histoy and we rose up during and afterwards to be the gresatest economic power on earth. Sadly, the major difference today, is all the partisan hate and division being perpetuated as opposed too, a national unity rallying around the problems of the past during the '29 Wall Street colllapse, followed by the depression, dust bowl and WWII. had it not been for a nunified peoples and government partnering with huge investments in the private sector, our economic greatness would have never been reality. NO one political party has "A" silver bullet answer as all the variable historic economic data validates! Our greatest strides in becoming the worlds greatest economic power was during the decades of democratic congressional dominance and a misxuture of democrat and GOP presidents. The difference from today? They worked together -- in unity -- for the common good and best interests of the nation. Now all we have is hate and division of not only the political parties, but the peoples of the nation.
1 year ago
1 year ago Link To Comment
Anybody who attempts to cast a bad light on taxation and any particular political party, by using self serving partisan rhetoric, does themselve a disservice and their readers.

Taxation in the U.S. has been a point of progressive (literal meaning) corruption and mismanagement in every congress since the first 'carve-out' was enacted. Next, comes the self serving ignorance perpetuating a false sense of the constitutional governance process between the legislative and executive branches.

1. A President has NO authority to 'legislate' anything and certainly NOT TAXES! Stating a president has lowered or increased taxes is a blatant lie! Only congress can authorize such an increase or decrease! Stating any presidents administration has 'caused' and or created the basis for a tax increase or decrease is, perpetuating a false fact. Presidents can only recommend and or request of congress, those things related to taxation and budgets.

2. Taxation has become the single most corruption inside government. How and why is what should be the consistant topic of discussion. HOW: The corruption stems from congressional corruption and private sector special interest corruption. WHY: The corruption has direct 'special' monetary advantages and benefit for members of congress and their states interests AND large private sector corporations, select economic sectors, wealthy individuals and large investors.

3. Want to return to a closed society and economy equal to that of a third world nation fine, then low or no taxation. Want to be a global economic competitor and leader with the ability to rapidly shift and respond to global social, political and commerce circumstances and progression, then taxation gives a nation that ability.

Sure, there plenty of tax problems to be addressed to make them more fair and theres an infinite problem with goverments corruption driving all the tax problems and mismanagement but -- they are not problems exclusive too only one political party!

Lastly! Those who perpetuate that any economic growth and success is tied 'directly' to tax rates are among the most disingenuous people inhabiting the globe. Historical data alone, proves them to be factualy wrong!

Wake up people! The last place you want to resorce factual infomation is from the intellectual think tank industry people! Just take a good look at world conditions since those think tank intellectuals have spawned like rabbits.
1 year ago
1 year ago Link To Comment
Incorrect assertions. Allow me to explain.

1) The President must sign the legislation, or be overridden (a difficult task). He is often the driver of policy, unless there is a powerful Speaker. Let's face it: If you do not have the Prez's support, you likely do not have the votes to even bother with a bill. (e.g. The Repubs, with a powerful Speaker in '95, had to force Clinton to shut down the government in order to get him to swallow some things. Not easy.)

2) No, most industries lobby just to prevent getting hit. Some use it as a weapon (See Sarbanes-Oxley), but most are dodging bullets. They are not necessarily using it for gain. IOW, they lobby for lower taxes and regulations, less government, for themselves. If government were not so busy messing with stuff, there would be no need. It is only corruption if it is for gain, not to prevent loss.

3) Low taxes do not spawn third-world nations. Low taxes spawn first-world nations. I cannot think of a single third-world nation which has low taxes. Always, high taxes lead to tyranny and economic destitution.

Which brings us to your other (not numbered) assertion. Historical data proves that lower taxes do indeed lead to economic growth, and higher taxes lead to the opposite... contrary to your assertion. I offer some evidence (which you do not with your assertions):

Roaring 20's - the tax rates were decreased drastically to 15%. Thus, roaring economy.

Great Depression - Rates were increased drastically, and we stayed stuck in a Depression from which everyone else in the world recovered. This lasted even until after WW2, until the people forced policy change in '47.

1950's - Rates came down again somewhat. Coupled with post-war boom, because the manufacturing in so many countries was destroyed, we saw real gains, but personal wealth did not gain drastically.

1960's - Kennedy lowered rates drastically, and the 60's, despite all the social disorder, was a time of real economic boom.

1970's - Carter's malaise. Rates had gone up again, and the economy dove again. It was a horrible time.

1980's - The Reagan years. Rates came down and the economy went up. Massive growth after the new rates took effect.

89-90 - Bush raised taxes, and immediately the economy went down a bit, which cost him re-election.

90's - Internet boom. Also cap gains went down strongly, which offset the top marginal rates going up.

00's - The Bush tax cuts did not take full effect until '05. The Dems always postpone these things until after elections. They did it to Reagan, and they did it to Bush 43. Rates went down, and we had full employment, as well as government getting more revenues than ever before.

We just passed tax increases, and the March job report stank "unexpectedly". Expect more similar bad news to follow.

So, yes, tax rates do have their effects. Correlation is not causation, but the bad always follows the increased taxes, and the good always follows the tax decreases. That is not correlation, but causation.

You are filled with self-righteousness in your post. You offered no substantiation, no facts, just assertions. It was an emotional screed. Lots of exclamation points. This is not how proper adults converse. Please try to offer facts, and do not be so bold in your assertions. Try to think that you might just be wrong, so as to not be so strident in your tone.
1 year ago
1 year ago Link To Comment
Nations with high and low tax rates -- This link discusses 12 nations with high and low tax rates from Europe and North America. As you will see your 'simplistic' approach is baseless.

http://www.businesspundit.com/12-countries-with-the-highest-lowest-tax-rates/?img=18761

Then you have this question pertaining to Third World nations: "Why have Hong Kong, South Korea, Taiwan and Singapore surged out of poverty into the ranks of industrialized nations? Why have African nations like Botswana, Mauritius and the Ivory Coast grown, while their neighbors Tanzania, Zaire, Liberia and Zambia stagnate?"

While there are many variables to precisely answer that question, there is one predominate variable for those who succeed: Foreign aid! Economic development and infrastructure aid! For those who fail with high tax rates, the most predominate variable is government corruption! Government corruption that does not invest in economic development and infrastructure. I could go on with a long dissertaion of examples supported by endles data but, the bottomline is that nothing is as simplistic and some like to present.
1 year ago
1 year ago Link To Comment
Nice try! Only radicalized minds would attempt such a feeble rewrite of the constitution. Then you go on to totally misrepresnt taxes, failing to measure to GDP without presenting an factual data -- talk about self-righteous arrogance!

1920 -- What was the outcome in '29 and continuing until the early 50s? You obviously don't have any living points of reference for the 30's, 40s and 50s but what you read in some book! The tax spending supported some pretty signifcant infrastructure advances for the nation for which following generations benefited. The dust bowl wiped out a significant portion of the national economy of the times taking out a significant portion of the nations agri and oil economies.

Then you bypass the 40s war era when the nation came together to support a major defistating war cost to the nation - a cost even tax increases could not retire -- in fact, the Clinton administration come closest to retiring that portion of the national debt.

Now as to the rest of your feeble attempts heres some factual data to take good look at.

http://www.usgovernmentspending.com/us_gdp_history
Here you will note that the GDP increased YTY throughout the charted time periods 1950-2010.

http://economics-charts.com/gdp/gdp-1929-2004.html
Here you have specific GDP from 1929 -2004

http://taxfoundation.org/article/us-federal-individual-income-tax-rates-history-1913-2013-nominal-and-inflation-adjusted-brackets
Here you have historic charts of tax rates and at the top please do take advantage of the options to adjust for inflation.

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=205
Here you have hiostoric federal tax revenues individual and corporate as percent of GDP from 1934 - 2011 and estimated beyond to 2017. You won't like this one!

http://www.ritholtz.com/blog/2011/07/government-spending-as-a-percentage-of-gdp-2/
Government spending as percent of GDP. Take a close look at the 'trendline' from 1931 excluding WWII. Then keep in mind that until Obama off-budget spending was not reflected -- it just went straight to the national debt.

http://wallstcheatsheet.com/stocks/how-broke-is-the-united-states.html/?ref=YF
This one is U.S. National debt -- look good at the Reagan era!

http://zfacts.com/p/318.html
This one is national debt by presidents. You really won't like this one!

http://zfacts.com/p/1195.html
You'll love this one even more!

http://online.wsj.com/public/resources/documents/JOBSHISTORY09.html
This is the historic unemployment rates - take a good look at the Reagan era or any other socalled great times since. Then take a look at the rates before globalizing our economies.

http://www.businessinsider.com/15-charts-about-wealth-and-inequality-in-america-2010-4#the-last-two-decades-were-greatif-you-were-a-ceo-or-owner-not-if-you-were-anyone-else-5
Now take a good look at the charts listed here. If the middle classes earnings don't stay up with increasing GDP and wealth holding equity, you evenutally have a very weak consumer consumption to GDP thus, a weak economy regardless of any tax rates.

http://www.businessinsider.com/15-charts-about-wealth-and-inequality-in-america-2010-4#the-gap-between-the-top-1-and-everyone-else-hasnt-been-this-bad-since-the-roaring-twenties-1

Now I could go on and on to highlight the specific variables that have caused the GDP to rise YTY inspite of economic conditions OR tax rates but you obviously haven't the capacity to understand and accept factual data -- just your hand-fed self serving partisan BS.

Bottomline. You don't have a clue what you're talking about! Historically, the GDP has risen YTY regardless of what tax rates were. Until Reagan and Bush Sr the national debt had increasingly come down, Tax rates is the least of the many variables influencing a vibrant economy! It certainly has no historic validation for hiring as the historic employment charts shows!
1 year ago
1 year ago Link To Comment
Marc, thank you for your measured and thoughtful response to Zeke. However, he is not here to learn anything or to accept any such logic and truth. Rather he is planted here at PJ Media to rant against it as it threatens the power and control of the current regime and its "progressive" ideology. This is what leads to his nonsensical and tortured screeds when painted into a corner by obvious facts.
1 year ago
1 year ago Link To Comment
so having the social security reduction in rate, going back to the proper rate to fund social security is bad, but raising tax rate back to prior rate of 39% is good.

And we are to believe those that spout this nonsense as serious??????????
1 year ago
1 year ago Link To Comment
Why bother working?

Its a lot easier to sit on your butt and claim disability.
1 year ago
1 year ago Link To Comment
That position in thinking is probably not a good one to have or follow! Take away ALL federal government subsidies from ALL the states and communities in those states and they'd ALL be in bankruptcy by sundown. Everybody and every stante and every community is on the federal government welfare rolls -- even yourself!
1 year ago
1 year ago Link To Comment
Since Obama took office, the FedGov has grown greatly, but the States have had to tighten their belts and lay off a huge number of workers. They have all managed with less... some better than others, notably the Red areas.

Yes, healthy people are using crutches, but it does not mean they cannot walk without them. They would not all be in bankruptcy by sundown. They would adjust. You offer a specious opinion, bereft of actual reasoning.
1 year ago
1 year ago Link To Comment
Once again you fail to support your simplistic conclusions!

Up above in another response to your silly propositions I've posted tons of historic data for you to educate yourself from.

"Since Obama took office, the FedGov has grown greatly"

First, take a good look at the charts I provided and look at government spending from the Reagan era foward noting that not until Obama, off budget spending was not included in the charts except for the national debt chart. Such off budget spending went 'straight' to the national debt. Then, take a good look at the '29 Wall Street collapse, depression and dust bowl era as a correlating era to, todays circumstances, noting we not only survived but went on to become the worlds most powewrful economy.

As to the states and their communites surviving without federal subsidies, you are again lost from reality. Most states budget liabilities are education, running from 45-75% including benefits of retirees. Most states are again looking at teacher furloughs after having blown through TWO large federal supplements to implement RtT. Then comes the States and communities public service employees liabilities to both their budgets. These two categories nearly wipe out every states budgets even with government subsides. Then move on to the states infrastructure funding which is supposed to be set-asides including the federal subsidies but spent on the above liabilities -- airports and runways, highways, untilities, sewers and water treatment facilities, community block grants, agri subsidies, energy subsidies, clean air and water subsidies, medicaid, employment training and on down the very long list of federal subsidies. I supose you could be right if you mean to say states can survive without federal subsidies if they were to raise tax rates to some level to compensate but that would be most all your paycheck.

And those Red States you wint to brag abour! Well I can bury you in data to show how much they receive in federal subsidies that other Blue States don't have the advantage of.
1 year ago
1 year ago Link To Comment
On Drudge, there is a blurb about a new poll wherein a majority think that their taxes are "fair". The fairness of the taxes paid can be viewed in different ways. First, is it "fair" relative to what others pay. Is it fair considering the cost of bloated government spending. Is it fair when hard working peoples' taxes are used to subsidize a large group of people who have no intent to ever work or be responsible for themselves.

The word "fair" is wishy-washy in that it is almost meaningless to describe anything but emotions devoid of facts. But, that is what our Leftist government likes, pure emotion with no analytical thinking, no response based on knowledge of facts. The poll is nothing but meaningless garbage at best.

1 year ago
1 year ago Link To Comment
Considering 47% of the adults of working age pay no income tax, I can see where they would think their taxes (0%) are fair. It wouldn't take much to raise that 47% to 55%.... just ask follywood.
1 year ago
1 year ago Link To Comment
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