Income Tax at 100: What Were They Thinking?

General

Jul 15

Written By Patrick and Raines CPA

2013

The hundredth anniversary of a continuous income tax
The government was furloughed for 16 days
Typhoon Haiyan devastated the Philippines

By now you probably remember the events better than we do!

2012

The United States wasn't even in the top ten countries with the highest income tax! Number one was Aruba with a top marginal rate of 58.95%
England's Queen Elizabeth II celebrated her diamond jubilee, becoming only the second English monarch to reign for 60 years
MasterCard and Visa announced a security breach involving 10 million compromised credit card numbers

2011

In 2011, the IRS collected more than $2.4 trillion from some 234 million tax returns (including corporate, individual, and employment returns). The IRS also sent out approximately $416 billion in refunds
Space Shuttle Atlantis completed the final mission in the shuttle program
Osama bin Laden was killed
Unrest led to leadership changes in Egypt, Libya, and Yemen

2010

An earthquake in Haiti killed over 200,000 people, and for many displaced persons life is still not back to "normal"
Airspace over most of Europe was temporarily closed due to ash from the eruption of Icelandic volcano Eyjafjalljokull
The first Youth Olympic Games were held in Singapore

2009

Barack Obama took office as the 44th President of the United States
Congress passed a major stimulus bill, with nearly $300 billion in tax relief
The Statue of Liberty's crown reopened to the public for the first time since the attack on the World Trade Center

2008

Six big tax laws passed in 2008: the Economic Stimulus Act; Heroes Earnings Assistance and Relief Tax Act; Housing Assistance Tax Act; Emergency Economic Stabilization Act; Worker, Retiree and Employer Recovery Act; and Heartland, Habitat, Harvest and Horticulture Act
Many of the world's stock exchanges saw the worst declines in history
Bill Gates stepped down as chairman of Microsoft

2007

The IRS reported that 99,316,995 taxpayers (approximately one in three Americans) called, wrote, or walked into an IRS office for help in 2007
The IRS estimated that, in 2007, Americans who didn't pay their taxes collectively owed more than $345 billion
England and Australia prohibited smoking indoors in public places

2006

The largest tax evasion case in U.S. history is that of telecommunications executive Walter Anderson, who pleaded guilty to a $200 million tax fraud in 2006
Congress passed three major and several minor tax-related laws this year, making more than 500 changes to the tax code
Fidel Castro handed over power in Cuba to his brother, Raul

2005

Congress used the tax code to encourage energy savings
YouTube was launched
Angela Merkel became chancellor of Germany
The first solo around-the-world flight with no stops for refueling

2004

The American Jobs Creation Act gave ordinary taxpayers, as well as businesses of all sizes, tax relief
A decommissioned British frigate was sunk off the coast of Cornwall as an artificial reef
The world's tallest skyscraper, Taipei 101, was officially opened. Here's an interesting tidbit: TAIPEI is mnemonic for Technology, Art, Innovation, People, Environment, and Identity. 101 represents the concept of striving for beyond perfection

2003

The Jobs and Growth Tax Relief Reconciliation Act lowered taxes on capital gains and dividends, accelerated marginal tax rate cuts, brought marriage penalty relief, increased the child tax credit, and extended the bonus depreciation
The space shuttle Columbia disintegrated during reentry into the Earth's atmosphere
This year marked the end of Saddam Hussein's regime in Iraq

2002

The Job Creation and Worker Assistance Act brought business tax relief, including a 5-year net operating loss carryback
Tax rates dropped, now ranging from 10% to 38.6%
Twelve European Union member states adopted the Euro as their currency

2001

The new millenium officially began
George W. Bush was inaugurated as America's 43rd president
The Tax Relief Act created more than 400 changes. Tax rates were lowered, the estate tax was repealed, contribution limits on 401(k)s and IRAs were increased
September 11 - terrorists attacked the United States

2000

Tax rates ranged from 15% to 39.6%
Y2K - the anticipated computer disaster that never happened
The dot com bubble burst and caused the stock market to crash

1999

The Euro was introduced as a trading currency
Melissa, the first successful mass mailing worm, infected multitudes of email programs worldwide

1998

Of the 4.8 million corporate tax returns filed this year, more than 90% were from companies with assets of less than $1 million
Culprits indicted in the Oklahoma City bombing were sentenced to jail terms

1997

The Taxpayer Relief Act brought more than 800 changes to the tax code. The child tax credit, Roth IRAs, capital gains reductions, and breaks for higher education were enacted
Great Britain transferred its colony of Hong Kong back to the Chinese
Tennis star Steffi Graf's father was jailed in Germany for tax evasion
Deaths of Princess Diana and Mother Teresa

1996

In a 1996 survey, public finance economists were asked to estimate what percentage of the corporate income tax in the United States was ultimately borne by owners of capital. Answers varied, but the average response was 41%. In their professional opinion then, more than half the tax burden is eventually shifted from owners to workers or other groups
The tax percentages did not change, but the income level taxed increased to $40,100 on the low end and $263,750 at the top
America's most decorated gymnast, Shannon Miller, won Olympic gold

1995

Carolina Panthers beat Jacksonville Jaguars in their first exhibition game
U.S. shuttle Atlantis docked with Russian space station Mir for the first time
Tax rates were 15% on income over $39,000, up to 39.6% on income over $256,500

1994

Baseball player Darryl Strawberry and his agent were indicted on tax evasion charges
Tax rates were 15% on income over $38,000, up to 39.6% on income over $250,000
The governments of the United States and France signed a new Convention "for the avoidance of double taxation and the prevention of fiscal evasion"

1993

Leadership of the United States passed to Bill Clinton
The Revenue Reconciliation Act of 1993 had a goal of reducing the federal deficit that would otherwise accumulate in fiscal years 1994 through 1998
Tim Berners-Lee and CERN provided web technology for free, enabling the rapid growth of the World Wide Web

1992

Taxpayers who owed money with their tax returns were permitted to file electronically
Leona Helmsley was jailed for tax evasion

1991

The United States and its allies attacked Iraq for occupying Kuwait
Tim Berners-Lee introduced a method for linking hypertext to the Internet
The Soviet Union was dissolved

1990

Riots broke out in England as citizens protested the "poll tax"
East and West Germany united
Russian satellites declared independence

1989

George H.W. Bush took over from Ronald Reagan
The Berlin Wall was torn down
Two solar flares significantly affected Canada, causing the entire province of Quebec to suffer a blackout in the spring, and affecting microchips that led to a halt of trading on Toronto's stock market in the summer
Voyager 2 discovered three more moons of Neptune
Chinese students demanded more political freedom in Tiananmen Square, Beijing; the government responded by declaring martial law and ultimately killing many

1988

Income tax rates increased for lower-income taxpayers - up from 11% to 15%
The federal deficit was about $155 billion
Winter Olympics in Calgary, Canada; Summer Olympics in Seoul, Korea

1987

Another change to the tax rates: taxpayers at the lower end paid 11% on income over $3,000, while those at the high end paid 38.5% on income over $90,000
President Reagan and General Secretary Gorbachev signed the INF Treaty, eliminating their intermediate-range and shorter-range missiles

1986

President Reagan signed into law the Tax Reform Act of 1986, one of the most far-reaching reforms of the United States tax system since the adoption of the income tax. The top tax rate on individual income was lowered from 50% to 28%
The new tax act (above) was the start of what later appeared to be a yearly tradition of new tax acts
In the 5 weeks surrounding year-end 1986, after enactment of the tax reform bill which raised the effective corporate tax rate, 225,000 companies elected Subchapter S status. (Compare this with 75,000 for all of 1985!)

1985

Federal income tax laws filled about 3,000 pages
Spacelab's first "real" (not test) flight
Cherry Coke was introduced; it was also the year of the short-lived "New Coke"
The price of first class postage in the U.S. increased to 22 cents, up from 20 cents

1984

The Reagan Tax Reform Act was the most complex bill ever, requiring more than 180 technical corrections
The first American woman to walk in space was Dr. Kathryn Sullivan
India's prime minister, Indira Gandhi, was assassinated

1983

Tax rates dropped again, with the low end now down to 11%
Thieves stole 6,800 gold bars from London's Heathrow Airport, most of which has never been recovered
The Walt Disney World Very Merry Christmas Parade was broadcast live from the Magic Kingdom for the first time

1982

The tax rates dropped, now ranting from 12% to 50%
In Italy, Sophia Loren was jailed for tax evasion

1981

Ronald Reagan took over leadership of the United States
Congress enacted the largest tax cut in U.S. history
Space Shuttle Columbia left the planet on its maiden voyage

1980

Post-It Notes were introduced
125,000 Cubans left their homeland for the United States in the Mariel boatlift
Jimmy Carter broke diplomatic relations with Iran due to the hostage crisis

1979

Margaret Thatcher became prime minister of the United Kingdom
Mother Teresa was awarded the Nobel Peace Prize
U.S. tax rates held steady, ranging from 14% to 70%; however, the income level at which the highest marginal rate was charged changed to $212,000, up from $200,000

1978

Menachem Begin, Anwar Sadat and Jimmy Carter signed the Camp David accord
Spain adopted a democratic constitution
Fluorocarbons were banned in aerosol sprays

1977

Jimmy Carter took over from Gerald Ford
The first Apple computer was released
The original Star Wars movie was released

1976

The United States celebrated its bicentennial
The generation-skipping transfer tax was introduced
Apple Computer was founded

1975

The Earned Income Tax Credit was approved by Congress
Microsoft was founded

1974

President Nixon resigned and Gerald Ford took over the running of a country with high inflation, a depressed economy, and chronic energy shortages
Charles de Gaulle Airport opened in Paris
Sicily's Mount Etna erupted

1973

Britain joined the European Economic Community
The U.S. Senate established the Select Committee on Presidential Campaign Activities to investigate the events surrounding Watergate
Talking of taxes . . . 1973 was the 200th anniversary of the Boston Tea Party

1972

Richard Nixon became the first U.S. president to visit China
The Stone Mountain relief carving of Jefferson Davis, Robert E. Lee, and Stonewall Jackson was completed
It was a memorable Olympics this year; who can forget Olga Korbut, Mark Spitz, and the terrorist attack on the Israeli athletes?

1971

Cigarette advertisements were banned on American television
The Aswan Dam in Egypt was opened
A decimal coinage system was adopted in the United Kingdom
Walt Disney World opened in Florida

1970

Income tax rates were still set at 14% on the low end, but the highest marginal rate dropped to 71.75%
The USSR made the first successful unmanned spacecraft landing on Venus

1969

The Tax Reform Act passed, delivering major amendments to the 1954 overhaul
Richard Nixon was installed as the nation's 37th president
Neil Armstrong and Edwin Aldrin Jr. became the first men to walk on the moon

1968

On the low end, income tax rates remained at 14%, but the highest marginal rate increased to 75.25%
Martin Luther King Jr. was assassinated
Robert F. Kennedy was assassinated

1967

Tax rates had been ranging from 14% to 70% for several years, but 1967 was the last year
The world's first ATM machine was installed in London, England
Dr. Christaan Barnard performed the first human heart transplant

1966

Corporate income tax provided about 23% of the United States' federal revenues
Canadian residents received the first color television transmission
Richard Walker discovered Saturn's moon, Epimetheus

1965

U.S. tax rates dipped again, now ranging from 14% to 70%
The Maple Leaf became the official flag of Canada
Cosmonaut Alexsei Leonov became the first person to walk in space
The United States sent troops to Vietnam

1964

U.S. income tax rates dropped from 16% on the low end, to a high of 77% for the top bracket
The U.S. report, "Smoking and Health," connected smoking to lung cancer

1963

President John F. Kennedy was assassinated; Lyndon B. Johnson took over at the helm
Winston Churchill became the first honorary U.S. citizen
Meanwhile, over in England, crooks got away with $7.3 million in the Great Train Robbery
In Iran, Ayatollah Khomeini was arrested after a state of siege was declared
Push button phones were introduced

1962

Cuban missile crisis
U.S. Navy SEALS were established
John Glenn became the first American to orbit Earth

1961

John F. Kennedy was installed as the United States' 35th president
The U.S. broke diplomatic relations with Cuba
Yuri Gagarin became the first person to orbit Earth

1960

Income taxes held steady, from a low bracket of 20% to a high range of 91%
The Family Circus comic strip debuted
Cuba nationalized U.S. businesses and the U.S. imposed an embargo on goods exported to Cuba

1959

After overthrowing Batista, Fidel Castro took over leadership of Cuba
The first color photograph of the Earth was taken from space

1958

Elvis Presley joined the U.S. Army
President Eisenhower signed a bill approving Alaskan statehood
After 26 years, the cost of a U.S. first class postage stamp increased by a penny to 4 cents
The United Kingdom installed traffic meters and the first stretch of motorway (not in the same place!)

1957

Saturday mail service was temporarily suspended in the United States due to lack of funds (sound familiar?)
A Patrick & Robinson team member was born on a tax deadline

1956

"In God We Trust" was authorized as the United States' motto
Television was first broadcast in Australia

1955

President Eisenhower raised the minimum wage from 75 cents to $1
Ray Kroc started the McDonalds hamburger chain
Disneyland opened in California
Elvis Presley made his first television appearance

1954

The IRS was busy!

The tax deadline day was pushed to April 15th for individuals
There was a major overhaul of the Internal Revenue Code, with 3,000 (yes, three thousand) changes to the tax rules
The first successful kidney transplant was performed

1953

Renowned general Dwight D. Eisenhower moved into the Oval Office
Dr. Jonas Salk announced the successful testing of a vaccine to combat polio
Edmund Hillary and Tenzing Norgay reached the summit of Mount Everest
Fidel Castro was jailed for his attempted coup in Cuba

1952

Tax rates were up: 22.2% on the low end, to a top rate of 92%
Queen Elizabeth II ascended the throne of Great Britian
National Secretaries' Week/Day (now Administrative Professionals' Week/Day) was first celebrated
Agatha Christie's "Mousetrap" opened at the theater in London. (It's still running!)

1951

The 22nd amendment to the U.S. Constitution limited presidents to two terms of office
Color television was first broadcast; unfortunately, most people had black and white sets
"I Love Lucy" debuted on CBS

1950

India gained independence from Britain
Peter Hodgson started marketing Silly Putty in plastic eggs
Mother Teresa founded the Missionaries of Charity in Calcutta, India

1949

A year of firsts:

Siam became Thailand
Luis Munoz Marin became the first democratically elected governor of Puerto Rico
David Ben-Gurion's party won the first Israeli election

1948

Taxes were lowered; they ranged from 16.6% to 82.13%
Britain's railways were nationalized
Sri Lanka declared independence from the U.K.
The first Polaroid camera was sold

1947

Britain's coal industry was nationalized
Richard Reynolds invented aluminum foil
Bardeen, Shockley and Brattain invented the transistor

1946

The war was over. Income tax rates in the U.S. were reduced to 19% (on the low end) through 86.45%
ENIAC, the first programmable digital computer, was completed
The Bank of England was nationalized
The bikini swimsuit was introduced in Paris

1945

World War II ended
Harry S. Truman assumed the presidency upon the death of Franklin D. Roosevelt
Due to heavy fog, a U.S. B-25 bomber crashed into the Empire State Building

1944

U.S. income tax rates increased to 23% on the low end, with a high of 94%!
New Zealand and the Soviet Union established diplomatic relations
D-Day in Europe

1943

The Current Tax Payment of 1943 reintroduced payroll tax withholding; unlike the 1913 Act, though, this time is wasn't repealed. Per the U.S. Treasury, "it also greatly reduced the taxpayer's awareness of the amount of tax being collected, i.e. it reduced the transparency of the tax, which made it easier to raise taxes in the future."
President Franklin Roosevelt, in an attempt to check inflation, froze wages and prices, prohibited workers from changing jobs unless doing so would aid the war effort, and barred common carriers and public utilities from increasing rates
One in three people paid income tax

1942

Franklin D. Roosevelt ordered men between the ages of 45 and 60 to register for non-military duty
Glenn Miller was awarded the first ever gold record for selling a million copies of Chattanooga Choo Choo
Mexico changed from three time zones to two
Food, coffee, and gasoline were rationed in the United States due to WWII

1941

Bob Hope performed his first USO show
Reza Shah abdicated the throne of Iran in favor of his son, Mohammad Reza Pahlavi
The Japanese attack on Pearl Harbor brought the United States into World War II

1940

War was in the air. Tax rates increased to 4.4% on the low end, up to 81.1%
In the midst of the war in France, the Lascaux Cave Paintings were discovered
The British fought the Battle of Britain, encouraged by Winston Churchill who praised the Royal Air Force by saying, "Never in the field of human conflict was so much owed by so many to so few."

1939

The USSR was expelled from the League of Nations
World War II began in Europe
Taxes still ranged from 4% on the low end, to a 79% marginal tax rate, but guess which way they'll be going next year

1938

Adolf Hitler seized control of the German army, and German troops invaded Austria
The top income tax rate in the U.S. was 79%

1937

Bernard Fantus established the first blood bank in the United States, at what was then the Cook County Hospital in Chicago
The United Kingdom established a national emergency phone number: 999
George VI was crowned King of England

1936

Edward VIII of England ascended the throne, but subsequently abdicated to marry Wallis Simpson
The NY Herald Tribune began microfilming its current issues
Adolf Hitler announced the building of Volkswagens - the people's car
Jesse Owens won 4 gold medals at the Berlin Olympics

1935

The passage of the Social Security Act in the United States provided aid to the unemployed, aged, needy, handicapped, and certain minors. A 2% tax was levied on the first $3,000 of income, half due from the employee and half from the employer. It was collected via payroll deduction
The number of casualties on the roads of Britain prompted the government to require driving tests
Persia became Iran (Iran is the Persian word for Persia)
Sir Robert Watson Watt invented radar
Paperback books were introduced

1934

Wages were taxed at 4% on the low end of the income scale, up to 63% on the high end
There was civil war in Austria
The USSR joined the League of Nations

1933

The Social Security Act passed, with an initial tax rate of 1% on the first $3,000 of taxable income
Adolf Hitler was appointed chancellor of Germany, and subsequently banned trade unions
Franklin D. Roosevelt was inaugurated as the 32nd President of the United States
America left the gold standard

1932

The Revenue Act of 1932 increased personal income taxes from 23% to 45%, doubled estate taxes, and introduced a sales tax and 1-cent federal excise tax on gasoline
Charles Lindbergh Jr. was kidnapped and killed
The cost of mailing a first class letter within the United States went up to 3 cents
King George V was the first British monarch to broadcast on the radio

1931

Al Capone was convicted of tax evasion
The "Star Spangled Banner" officially became the U.S. National Anthem

1930

Declining tax revenues due to the depression produced a $200 million deficit
The telephone connection between England and Australia went into service

1929

The start of the Great Depression
The highest marginal tax rate dropped to 24%
Herbert Hoover became the United States' 31st president
Mother Teresa arrived to work in Calcutta
Salvador Dali put on his first one-man show

1928

Andrew Mellon suggested repealing the estate tax and lowering corporate taxes. Congress agreed to reduce the corporate tax, but kept the estate tax
The first solo England to Australia flight was made by Bert Hinkler
Pre-sliced bread was introduced

1927

A quiet year on the tax front
Lindbergh became the first pilot to cross the Atlantic solo
The Grand Ole Opry was first broadcast on the radio from Nashville, Tennessee

1926

This was a year of tax cuts - including the estate tax - and higher exemptions
The Methodist church voted to allow women to become priests
A general strike was called in Great Britain in support of the coal miners, who were on strike for more than 6 months

1925

The top income tax bracket dropped to 25%
Great Britain returned to the gold standard
Norway's capital was renamed Oslo
Adolf Hitler's "Mein Kampf" was published

1924

Nationally: Andrew Mellon urged lower tax rates, claiming that high rates would encourage people to look for ways to avoid paying
Globally: France hosted the first Winter Olympics
Universally: Hubble announced the existence of distant galleries

1923

Calvin Coolidge took office upon the death of Warren Harding. (The notary public administering the oath was Coolidge's father.)
The USSR was established.
The Hollywoodland sign was dedicated. (The "land" was dropped in 1949.)

1922

The tax rate for taxable income up to $4,000 was just 4%; if you had taxable income over $200,000 your rate was 56%! (This was down from last year's 73% though.)
Geologists declared the U.S. oil supply would only last 20 years.
Howard Carter discovered the tomb of Tutankhamun. (If you're a fan of Downton Abbey you may be interested to know that Lord Carnarvon funded Howard Carter's expedition. Lord Carnarvon's home was Highclere Castle, a.k.a. Downton Abbey. You can bet they pay a lot of property tax.)

1921

This year the Republicans engineered the first of a series of tax cuts
Warren Harding took over the White House
Afghanistan gained sovereignty after 84 years of British rule

1920

The war was over, but

Terrorists were still active. A bomb on Wall Street took more than 30 lives and injured over 300.
The Democrats and some Republicans wanted to retain income taxes at wartime rates.

In lighter news:

Walt Disney got his first job as an artist
The New York Yankees purchased Babe Ruth
Dutch airline KLM took its first flight, and Australian airline Qantas was formed
The United States Postal Service announced that children could not be sent via Parcel Post

1919

The Bureau of Internal Revenue hired another 1,000+ auditors to address its chronic personnel shortage
UPS was formed
Congress passed the Nineteenth Amendment (it would be ratified in 1920), granting American women the right to vote
Alcock & Brown made the first nonstop air crossing of the Atlantic

1918

In this year,

World War I came to an end
The Bureau of Internal Revenue staff grew to 9,600 employees
British women aged 30 and older were granted the right to vote

1917

This year,

Congress passed an excess profits tax on corporations. Individuals with incomes over $6,000 were also subject to the tax
A 2% tax on income over $1,000 ($2,000 for married couples) was introduced
Jeannette Rankin became the first female member of congress
The first jazz record was recorded

1916

Congress was busy this year:

The U.S. Naval Reserve was created
Needing additional revenue for war expenses, Congress increased the income tax from 1% to 2% for individuals
Corporate income tax was also raised from 1% to 2%
The federal Estate Tax was established

1915

In this year:

Several congressmen complained that the 4-page income tax forms were too complicated. (Unfortunately, no one listened to them . . . )
Woodrow Wilson became the first president to attend a World Series game
Albert Einstein published his Theory of Relativity

1914

1914 was a tough year:

The first Form 1040 was issued by the Bureau of Internal Revenue and was due to be filed by March 1st
World War I started in Europe

1913

Prior to 1913, Congress had to approve the collection of income taxes for special circumstances. In this year, future generations' lives were changed forever when the 16th Amendment was ratified:"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."Also during this year,

The Federal Reserve System was created
The Chinese foreign debt was $835 million (equals $19.417 trillion in today's money; compare that with the current U.S. foreign debt of $16.44 trillion)
In Sheffield, England, Harry Brearly invented stainless steel
Woodrow Wilson was inaugurated as the United States' 28th president
Richard Hellman trademarked the blue ribbon on the mayonnaise jars

Patrick and Raines CPA