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Fact of the Day– Tax Day Edition

Merry Tax Day!  In honor of everyone’s favorite holiday, here are some interesting historical facts from Yahoo! about taxation in the USA:

  • The first personal income taxes in the United States were levied in 1861 by an act of Congress, mostly to foot the bill for the newly erupted and very costly Civil War. There were so many questions and problems with the new system, however, that nothing was collected until the following year.
  • Income tax, along with many other taxes imposed during the Civil War, was repealed after 1865 because the government simply had no need for the extra revenue. The majority of federal income came from taxes on tobacco and alcohol, which were hot commodities at war’s end.
  • Think you give a lot to Uncle Sam today? Just be thankful you weren’ t paying income tax in 1945, when the country’ s top earners doled 94 percent of their salaries over to the government, mostly to recoup costs incurred from the war effort. Taxation rates for the highest income brackets hovered between 82 and 92 percent until 1963.

Read more here.

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9 comments to Fact of the Day– Tax Day Edition

  • than

    That’s not exactly true. The top *bracket* paid 94%, that is, every dollar over a certain (large) number of dollars paid 94%

  • Lord Tantrum

    Don’t really see a difference, than…

    Take a look at this (scroll down to the last page.)

  • Kurat

    Oops, lost the second part of my post. They only paid 94% on income over $200,000.

  • Lord Tantrum

    You’re sure it’s marginal, Kurat? In any case, it’s a lot of tax money!

  • Yes Lord Tantrum,

    The tax rate is now and was then marginal. There is no reason that a person cannot pay 50, 60, or even 70 percent taxes on their salary above say $5 million dollars.

    Keep in mind that we tax income in this country and not wealth. A person that has $20 million dollars and earns a salary of $500k per year only pays taxes on that $500k.

    If a person earns money off of money then they will probably pay capital gains taxes in some way. These taxes are somewhere between 0% and 15%. Compare these numbers to the 35% tax bracket for a person making a salary of $150,000 per year.

  • Lord Tantrum

    I know it’s a marginal rate now, Jimmy, wasn’t sure how long it had been that way though. And surely they had deductions similar to what we have today. Nobody was literally paying 94% of their income… still, they were paying a much higher percentage at the top than we are today.

  • Absolutely the top earners paid more then than now. Not only were the top income earners paying more in the 40s but also the 50s, 60s and 70s. It seems really crazy to me that much of the argument for lower taxes is that the rich create jobs with that extra money. But during the “golden years” when America was supposed to be so wonderful the rates on these people were much higher.

  • Lord Tantrum

    Exactly. Nobody likes paying taxes, but it’s not like our current tax rates are the highest ever. Hopefully we can get out of this recession, reduce government spending, and lower taxes again.

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