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Article about the history of Income Tax

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    Article about the history of Income Tax

    "The difference between death and taxes is that death doesn't get worse every time Congress meets." - Will Rogers.

    "The hardest thing in the world to understand is the income tax." - Albert Einstein.



    "I just did my taxes, and I can tell you, I'm paying it back a lot faster than they gave it to me." - former IRS investigator Donald Craft of Florence.

    An IRS auditor with a sense of humor might be as rare as a tax error in your favor. But Craft has a wit as dry as fine print.
    I asked him if taxpayers panicked when he called.

    "If I didn't show up, they didn't complain," he drawled.

    Craft, now going on 80, spent 25 years at the Internal Revenue Service on a personal quest for the original golden fleece.

    He was not looking for a magical sheepskin from Greek mythology. He was looking for the first IRS-1040 that fleeced taxpayers for government gold starting in 1913 - right after ratification of the 16th Amendment to authorize an income tax.

    Yes, believe it or not, until 1913 America somehow got by without the IRS.

    Craft finally found that first 1040. And it tells an amazing story. For example:

    The entire 1913 tax form was four pages long. The current IRS-1040 booklet I got in the mail this year fills 150 pages.

    All the federal income tax regulations in 1913 were written on 400 pages. Today, IRS rules fill more than 66,000 pages.

    In 1913, a corporate tax return was 20 pages. "Now it would be a stack of paper four or five feet high," Craft said.

    In 1913, a loaf of bread was 6 cents, a gallon of gas 12 cents, a new car $500, a new house less than $3,500; and the standard deduction for a married couple was $4,000.

    In today's dollars, according to the online inflation calculator www.westegg.com/inflation, those prices would be $1.27, $2.55, $10,615, and $74,305, respectively; that standard deduction would now be $84,920.

    But the actual standard deduction for a married couple in 2007 is a bit lower: $17,500.

    In 1913, only 1 percent of Americans paid any income tax. The tax rate increased from 1 percent to 2 percent at $20,000, and so on, up to a top rate of 7 percent at $500,000 - which would be the 2008 equivalent of $9.8 million.

    Today, the bottom rate is 10 percent. Top tax rates on the wealthiest Americans have roller-coastered as high as 77 percent in World War I and 94 percent in World War II. The top rate today is 35 percent.

    In 1913, anyone with a pencil and sixth-grade arithmetic skills could fill out their own taxes in a few minutes. And there was no withholding to take the money before they saw it. If they owed, they had to write a check.

    Today, two-thirds of all taxpayers need professional help. Total tax preparation costs are more than $300 billion a year. The Government Accountability Office says tax-filing time and expenses equal 20 percent of all that is collected.

    Craft pointed out that even the filing date has been moved from March 1 to April 15.

    "Every item on it has been changed but one thing," he said, holding up a copy at his desk as he finished his own taxes. "The form number. It's still IRS Form 1040."

    Here's something else that hasn't changed in 95 years: Taxes stink.

    "Today, it takes more brains and effort to make out the income-tax form than it does to make the income," said Alfred E. Neuman, the gap-toothed philosopher of Mad Magazine.

    "The income tax has made more liars out of the American people than golf has," said Will Rogers.

    What the rest of us say is mostly unprintable.


    Peter Bronson is a columnist for The Enquirer. E-mail pbronson@enquirer.com or call 513-768-8301.

    #2
    I always said when I retired I was going to write a book. I wish I had written everything down along the way.

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