Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, April 14, 1991 TAG: 9104140091
SECTION: NATIONAL/INTERNATIONAL PAGE: A/1 EDITION: METRO
SOURCE: The Baltimore Sun
DATELINE: LENGTH: Long
The 1913 income-tax law took up 14 pages in the law books; today, it runs about 4,100 pages with an additional 5,000 pages of regulations, and nearly half of all U.S. taxpayers seek outside help in figuring out their taxes. The original tax applied to all income "from whatever source derived"; today nearly half of all income is excluded. Today, the income tax encourages ordinary people to buy houses, exposes corporations to takeover artists and dictates how people invest their money.
Some highlights in the story of America's income tax:
\ 1861 - Congress imposes a 3 percent federal tax on all incomes above $800 a year to pay for the Civil War.
\ 1862 - President Lincoln signs legislation broadening the income tax "to provide internal revenue to support the government and pay interest on the public debt." The new law gives the secretary of the treasury the power to hire employees to collect the tax and detect fraud.
Two weeks later, George S. Boutwell, former governor of Massachusetts, becomes the first commissioner of the new Bureau of Internal Revenue. He is assigned three clerks and given a small room in the Treasury Building, but it is the birth of what will become the greatest tax-collecting machine in the history of the world - the U.S. Internal Revenue Service.
By Christmas, Boutwell is receiving up to 800 letters a day from taxpayers, and he has built up a staff of nearly 4,000. The tax is collected in this manner: Each taxpayer lists his income and taxable property and then hands the list over to the local T-man. The local collector adds to this list any information he had gathered on his own and then figures the tax (between 3 and 5 percent), posts the figures in a public place and attempts to collect.
The collectors are empowered to seize and sell property, but they are also personally liable for any delinquencies - and therefore very aggressive.
\ 1872 - Congress repeals the Civil War income tax.
\ 1890 - Congress enacts a tax on domestically grown opium. After the repeal of the income tax, the federal government finances itself with a variety of taxes, including levies on items such as whiskey, tobacco, oleomargarine and other "luxuries." In addition, money is raised from tariffs on foreign goods and the sale of public lands.
\ 1894 - Congress levies a 2 percent tax on income over $4,000. Only one in every 100 Americans is rich enough to pay it.
\ 1895 - After one of the most celebrated legal battles in American history, the U.S. Supreme Court strikes down the federal income tax by a 5-4 vote, holding the 1894 tax is not apportioned according to the population of the states as required by the Constitution.
\ 1909 - The state of Virginia enacts an income tax, but huge numbers of its citizens simply refuse to pay it. Tax agents go into rural counties to collect it and are never heard from again. The tax is repealed in 1910 after less than $100,000 is collected.
\ 1912 - With 35 states ratifying the 16th Amendment to the Constitution, authorizing a federal income tax, Delaware and Wyoming race to become the decisive 36th. Wyoming wins by a nose on Feb. 13, 1913. Pennsylvania never takes action on the proposal.
\ 1913 - Congress enacts an income tax that is quickly signed into law by President Woodrow Wilson. The House Ways and Means Committee calls the bill a response to "the general demand for justice in taxation."
\ 1914 - The Department of the Treasury introduces the filing form for the new income tax. Together with its instructions, it is four pages long.
\ 1915 - Some congressmen find that they cannot fill out their returns because the instructions are too confusing. They turn to the House sergeant-at-arms, who thus becomes one of America's pioneer tax preparers.
\ 1916 - The 1913 act, which taxes income "from any lawful business," is amended by eliminating the word lawful - thereby clearing the way for taxing such activities as bootlegging, gambling and other illegal enterprises.
\ 1917 - The war creates a popular acceptance of the income tax by making the paying of it a patriotic duty. The War Revenue Act of 1917 raises rates and lowers exemptions.
\ 1931 - After years of murdering, stealing, extorting, smuggling and bribing with impunity, Chicago mobster Al Capone is toppled from power for tax evasion. Capone is sentenced to 11 years in federal prison for failing to file a Form 1040 between 1924 and 1929.
\ 1942 - Congress authorizes the deduction of medical and dental expenses from taxable income.
A Gallup Poll shows that of the 34 million Americans subject to the income tax for the first time, fewer than 15 percent are setting aside money to make the payment.
\ 1943 - There is considerable concern over the ability of G.I. Joe and Rosie the Riveter to come up with their tax payments in a lump sum, and a solution is offered by Beardsley Ruml, chairman of the New York Federal Reserve Bank: the mandatory withholding of taxes from paychecks by employers.
After euphemizing the concept as "pay-as-you-go," Congress passes the Withholding Tax Act of 1943.
\ 1944 - Income tax rates climb to their highest levels in history - beginning at 23 percent and rising to 94 percent on incomes above $200,000. One of those most affected by the high rates is a young Hollywood actor who is just beginning to earn big money - Ronald Reagan - and the 94 percent bite converts him from a New Deal Democrat to a conservative Republican.
Chester Clark, 42, an unemployed shipbuilder, commits suicide in Fort Myers, Fla.; police say that Clark was literally worried to death over his inability to decipher his income-tax return. His wife says that he had been under the impression that the tax was due Feb. 15. He shot himself while she was away consulting a tax expert, who told her that Clark owed the government $7.50.
\ 1952 - Albert Einstein says: "The hardest thing in the world to understand is income taxes."
\ 1954 - Child-care expenses become deductible for widows, single parents and certain other taxpayers.
The deadline for filing income-tax returns is changed from March 15 to April 15, chiefly because many taxpayers need more time to complete the task.
\ 1955 - Because their mother wants them to work together, the Bloch brothers - Henry and Richard - set up a company in Kansas City, Mo., to help people prepare their tax returns. The brothers change the name of the company to Block so it won't be mispronounced as "blotch." In 1989 H&R Block preparers filled out one in every 10 income-tax returns filed with the IRS.
\ 1956 - Contestants who win the top prize on television's "The $64,000 Question" find that they have only $25,000 after federal income taxes.
\ 1961 - The IRS resorts to automatic data processing to keep the American taxpayer honest. A huge IBM computer is installed in a special building in Martinsburg, W.Va., and promptly dubbed the Martinsburg Monster. Taxpayers are required to use their Social Security numbers on all returns, ending the days when John R. Doe could avoid paying taxes by using the name J. Robert Doe.
\ 1981 - The Treasury Department estimates that income-tax evasion in the United States totals $90.5 billion a year.
\ 1985 - Because of computer snafus and gross mismanagement, the nation's tax-collection system almost collapses. Hundreds of thousands of tax returns are lost, millions of returns pile up in IRS processing centers, refunds worth hundreds of millions of dollars are delayed or incorrect, and fully compliant taxpayers are subjected to unjustified dunning notices and threats to seize property.
Some IRS employees are so overworked and frustrated that they deliberately destroy tax documents and returns. \
1986 - Congress enacts sweeping tax changes. The maximum income tax rate is set at 28 percent, and the deductions for sales tax payments and non-mortgage interest are phased out.
\ 1990 - The IRS has 120,000 employees to collect $1 trillion in taxes, but IRS Commissioner Fred T. Goldberg admits that it is letting $40 billion a year slip through its fingers because of old technology and high staff turnover.
During the golden age of Babylon - some 4,000 years ago - King Hammurabi consulted astronomers to determine the most propitious time for his subjects to pay taxes. We don't know what they told him, but we do know that the IRS says that your taxes are due Monday by midnight.
by CNB