Ravenous Wolf
04-14-2004, 07:35 PM
April 15 wasn't always like this
No one set out to build a tax system that confuses many, infuriates most and touches virtually all. It took nearly a century of hard work.
By MSN Money staff
Today is April 15, the deadline by which we must all file our federal income tax returns or file for an extension and pay any tax due. (There are no extensions on paying up.)
April 15 wasn't always a day to dread. In fact, until 1955, March 15 was the deadline.
The modern income tax wasn't introduced until 1913, when three-fourths of the states ratified the 16th Amendment to the Constitution. Even then, almost no one had to pay. Taxation of 1% started at the net lofty income of $3,000 and topped out at 7% in the robber-baron stratosphere of $500,000 and up.
If you've just pulled an all-nighter figuring out your Alternative Minimum Tax, downloading form after form and triple-checking your math -- only to write a painful check -- you might wonder how it all got so complicated. Well, here's how:
1913: President Woodrow Wilson signs the first income tax bill in October (actually, the Underwood Simmons Tariff Act, because the aim of the bill is to make consumer goods cheaper by reducing stifling import duties. The income tax is merely to make the bill what today would be called "revenue neutral.").
The first system is concocted by accountant Nina Wilcox Putnam, who would later write the screenplay for 1932's "The Mummy." That first 1040 form and instructions are four pages long. The first tax code has 11,400 words. The filing deadline is March 1. The Bureau of Internal Revenue has 3,000 employees. Less than 1% of the population pays income tax.
1917: A personal exemption allowance for dependents and a deduction for charitable contributions is introduced.
1917: The deduction of federal excise taxes is eliminated. (The deduction for state excise taxes other than those on gasoline was eliminated for 1964; and the deduction for state gasoline taxes was eliminated for 1979.)
1918: Filing date is moved to March 15, offering relief to swamped Bureau of Internal Revenue.
1935: The first Social Security taxes are levied to provide public aid to the unemployed, aged, needy and disabled. These programs are financed by a 2% tax on the first $3,000 of an employee's wages, one half subtracted directly from pay and one half collected from employers on the employee's behalf. That maximum burden of $60 has risen to $5,449 for 2003.
1939: State and local government employees lose their tax exemption.
1941: A tax “look-up” table for use by certain low-income taxpayers is introduced, thus simplifying the tax computation for these individuals. The tax look-up table was later expanded to higher income levels.
1942: A deduction for unusually large medical expenses is introduced (and was modified several times thereafter).
1943: Taxes are withheld from paychecks.
1944: The “standard deduction” concept is introduced as an alternative to requiring taxpayers to itemize qualifying personal expenses.
1948: An “income-splitting” concept is introduced to permit married couples to treat their joint incomes as half earned by each spouse and taxed as if each spouse were taxed separately, usually resulting in a lower combined tax.
1953: The Bureau of Internal Revenue is renamed the Internal Revenue Service.
1961: Congress requires taxpayers to use Social Security numbers as a means of identification.
1964: An “income averaging” concept is introduced but later rescinded, effective 1987. It was then reintroduced for farmers only, starting in 1998.
1967: All returns are handled by computer.
1975: An “earned income credit” against tax which was “refundable” is created for some low-wage earners (and subsequently modified several times).
1987: Unemployment compensation is made fully taxable.
1984: Social Security benefits are made partially taxable. The taxable portion was increased, starting in 1994.
1985: Inflation adjustments are introduced for personal exemptions, “standard deductions,” and the tax “bracket” boundaries. (Inflation adjustments were also taken into account in defining the tax return filing thresholds.)
1987: State sales taxes are no longer deductible.
1987: Deductions for “personal” interest and mortgage real estate loan interest are limited, and those for investment interest can only be applied against investment income. Deductions for personal interest were disallowed altogether, starting in 1991.
2004: The tax code has grown to 2.8 million words. The IRS has 99,000 employees. More than 90% of the U.S. population is covered by filed returns.
No one set out to build a tax system that confuses many, infuriates most and touches virtually all. It took nearly a century of hard work.
By MSN Money staff
Today is April 15, the deadline by which we must all file our federal income tax returns or file for an extension and pay any tax due. (There are no extensions on paying up.)
April 15 wasn't always a day to dread. In fact, until 1955, March 15 was the deadline.
The modern income tax wasn't introduced until 1913, when three-fourths of the states ratified the 16th Amendment to the Constitution. Even then, almost no one had to pay. Taxation of 1% started at the net lofty income of $3,000 and topped out at 7% in the robber-baron stratosphere of $500,000 and up.
If you've just pulled an all-nighter figuring out your Alternative Minimum Tax, downloading form after form and triple-checking your math -- only to write a painful check -- you might wonder how it all got so complicated. Well, here's how:
1913: President Woodrow Wilson signs the first income tax bill in October (actually, the Underwood Simmons Tariff Act, because the aim of the bill is to make consumer goods cheaper by reducing stifling import duties. The income tax is merely to make the bill what today would be called "revenue neutral.").
The first system is concocted by accountant Nina Wilcox Putnam, who would later write the screenplay for 1932's "The Mummy." That first 1040 form and instructions are four pages long. The first tax code has 11,400 words. The filing deadline is March 1. The Bureau of Internal Revenue has 3,000 employees. Less than 1% of the population pays income tax.
1917: A personal exemption allowance for dependents and a deduction for charitable contributions is introduced.
1917: The deduction of federal excise taxes is eliminated. (The deduction for state excise taxes other than those on gasoline was eliminated for 1964; and the deduction for state gasoline taxes was eliminated for 1979.)
1918: Filing date is moved to March 15, offering relief to swamped Bureau of Internal Revenue.
1935: The first Social Security taxes are levied to provide public aid to the unemployed, aged, needy and disabled. These programs are financed by a 2% tax on the first $3,000 of an employee's wages, one half subtracted directly from pay and one half collected from employers on the employee's behalf. That maximum burden of $60 has risen to $5,449 for 2003.
1939: State and local government employees lose their tax exemption.
1941: A tax “look-up” table for use by certain low-income taxpayers is introduced, thus simplifying the tax computation for these individuals. The tax look-up table was later expanded to higher income levels.
1942: A deduction for unusually large medical expenses is introduced (and was modified several times thereafter).
1943: Taxes are withheld from paychecks.
1944: The “standard deduction” concept is introduced as an alternative to requiring taxpayers to itemize qualifying personal expenses.
1948: An “income-splitting” concept is introduced to permit married couples to treat their joint incomes as half earned by each spouse and taxed as if each spouse were taxed separately, usually resulting in a lower combined tax.
1953: The Bureau of Internal Revenue is renamed the Internal Revenue Service.
1961: Congress requires taxpayers to use Social Security numbers as a means of identification.
1964: An “income averaging” concept is introduced but later rescinded, effective 1987. It was then reintroduced for farmers only, starting in 1998.
1967: All returns are handled by computer.
1975: An “earned income credit” against tax which was “refundable” is created for some low-wage earners (and subsequently modified several times).
1987: Unemployment compensation is made fully taxable.
1984: Social Security benefits are made partially taxable. The taxable portion was increased, starting in 1994.
1985: Inflation adjustments are introduced for personal exemptions, “standard deductions,” and the tax “bracket” boundaries. (Inflation adjustments were also taken into account in defining the tax return filing thresholds.)
1987: State sales taxes are no longer deductible.
1987: Deductions for “personal” interest and mortgage real estate loan interest are limited, and those for investment interest can only be applied against investment income. Deductions for personal interest were disallowed altogether, starting in 1991.
2004: The tax code has grown to 2.8 million words. The IRS has 99,000 employees. More than 90% of the U.S. population is covered by filed returns.