US Federal Government’s First Personal Income Tax (1861)
The US federal government imposed the first personal income tax, on August 5, 1861, to help pay for its war effort in the American Civil War – (3% of all incomes over US$800).
It was only in 1894 that the first peacetime income tax was passed through the Wilson-Gorman tariff. The rate was 2% on income over $4000 (equivalent to $110,000 in 2016), which meant fewer than 10% of households would pay any. The purpose of the income tax was to make up for revenue that would be lost by tariff reductions.
In 1913, the Sixteenth Amendment to the United States Constitution made the income tax a permanent fixture in the U.S. tax system. Congress re-adopted the income tax in 1916, levying a 1% tax on net personal incomes above $3,000 and a 6% surcharge on incomes above $500,000. By 1918, the top rate of the income tax was increased to 77% on income over $1m to finance World War I.
Similar posts you may like
- Is your accountant a Penguin?
If your accountant says you can legally save tax by storing your money in places inhabited only by penguins, seals and seabirds, red alarm Read more
- Raise Your Prices 10%
Raising your selling prices will increase sales when your product or service has an inelastic demand curve i.e. when you raise prices and there Read more
- 3 Preconditions for Taxing Income
The concept of taxing income is a modern innovation and requires three things: a money economy, an accurate accounting system, and thirdly, an orderly Read more
- From spreadsheets to strategy, the evolution of tax planning tools
Tax planning in Australia has come a long way. Timeline of tools 1985–2011: Microsoft Excel dominates – flexible but labour-intensive. 2012–2014: QuickBooks, MYOB, Xero Read more
"You’d be stupid not to try to cut your tax bill and those that don’t are stupid in business"
- Bono: U2