What is the big deal with CPAs and April 18th this year?

Welcome to tax filing deadline day! Thanks to April 15th falling on a Saturday and an obscure holiday in DC, tax filing deadline falls on April 18th this year.

If you’ve got the interest (and a moment or two), here is a brief history of taxation in the United States. Hat tip to Forbes and Investopedia for timeline information.

The modern tax system, which includes individual and corporate income taxes, was established with the passage of the 16th Amendment to the Constitution in 1913. However, the history of income taxation in the United States dates back to the Civil War era.

The first income tax was implemented during the Civil War in 1861. The goal was to generate revenue to fund the war effort. The initial tax was levied on individuals who earned more than $800 per year and was set at a rate of 3%. Over the course of the war, the tax was increased several times to help pay for the ongoing conflict.

After the war, income taxation was repealed in 1872, but it was reintroduced in 1894. This tax was declared unconstitutional by the Supreme Court in 1895 because it was seen as a direct tax, which was prohibited by the Constitution. The 16th Amendment was passed in 1913 to allow the government to collect income taxes without such restrictions.

The first income tax under the 16th Amendment was a modest 1% on incomes over $3,000 for individuals and $4,000 for married couples. The tax was progressive, with higher rates for those with higher incomes. Over time, the rates and income brackets changed to reflect economic and social changes in the country. During World War I and World War II, rates were increased to help finance the war effort. In 1944, the top marginal tax rate was as high as 94%.

Corporate income taxes were introduced in 1909, but they were initially small and did not play a significant role in government revenue until after World War II. The highest corporate tax rate in the US was 52.8% in 1968. In recent years, the rate has been lowered to encourage business investment and growth.

Other taxes such as payroll taxes, estate taxes and excise taxes have also evolved over time, with adjustments reflecting economic, social, and political changes in the country.

Today, income taxes are a prominent source of revenue for the US government, accounting for over half of all federal revenue. Income taxes provide funds for government programs such as national defense, education, healthcare, and infrastructure development. Don’t forget the hundreds of billions doled out to foreign countries in aid, and reward for dancing to the tune of the regime in power.

To all my tax friends who have made it this far – thanks for doing your best to keep all us taxpayers in compliance on a timely basis. Now go take some time off! You’ve earned it!

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