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While we may cringe at the utterance of
the word “tax,” there is a lengthy historical background to the evolution of
taxes that includes numerous quirky laws, provisions, and instances when
taxes were declared “unconstitutional.” Below are some of the most
interesting facts about taxes in the United States.
Bizarre and On
the Books
In certain states, these bizarre tax laws make it easy to be fraudulent
– and not even know it!
-
Jock Tax:
Not just for jocks, this is a real tax placed on all performers. The
revenue earned while performing is taxed according to the state of
performance. Professional athletes are amongst those most affected by
the tax since 50 percent of their games are in other cities.
-
Facial Hair Tax:
According to Massachusetts tax law, it is illegal to have a goatee
without proper licensing. Not only is a small fee required to wear the
facial hair in public, but one can actually be fined if a license is not
presented to a law enforcement official upon request.
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The Illegal Drug Tax
.
In Alabama, North Carolina, and Nevada, tax law requires a stamp for
illegal drugs that registers tax payments on the drugs. The stamp
value, which goes on the container of goods, is determined by the amount
of the contents, and can be purchased at the Department of Revenue.
Don’t be afraid to report accurately because it is illegal for revenue
employees to communicate any information about you to the authorities.
As if arrest for possession were not bad enough, the stamp is the only
redeeming part of the crime because it prevents a higher fine if the
drug tax had not been paid.
Origins
Taxation was implemented on March 3, 1791 as an internal revenue law to
fund the foundling United States. A tax on distilled spirits and stills
was followed by the rather arbitrary taxes upon “carriages, retail
dealers in wine and foreign spirituous liquors, snuff, refined sugar,
property sold at auction, legal instruments, real estate and slaves.”
After only 11 years, these taxes were abolished in 1802. Taxes were
refined and reinstated in 1813 and stopped again in 1818 for another 44
years.
In 1862 the first income tax began,
exponentially improving the efficiency of the tax system. President
Grover Cleveland reinstated the income tax in 1894 – however, the
Supreme Court ruled it unconstitutional the very next year. This ruling
lasted until 1913, when the 16th Amendment to the
Constitution was ratified, giving Congress the right “to lay and collect
taxes on incomes.” Tax growth can be seen in comparing total receipts
over the experimental decades, where the tax from 1791 to 1802 reached
only $6.7 million. In 1938 alone, the total amount was $5.6 billion,
and today the total amount accrued each day of the year is more
than $5.6 billion.
In the US in 1921, the first-bracket
rate was increased to 4 percent on incomes over $4,000, and the top rate
was 73 percent on incomes over $1 million. By 1944, the tax rate
reached an all-time high, starting at 23 percent on incomes over $2,000,
and 94 percent on incomes over $200,000. And you thought current rates
were excessive!
The total number of 2003 tax returns
filed with the Internal Revenue Service totaled 222 million. The good
news for the trees is that 53 million (24%) of those returns were filed
electronically – with many more expected for 2004.
Alternative
Minimum Tax
The minimum tax (precursor to today’s AMT) was established in 1969 when
angry taxpayers learned that 155 wealthy individuals, defined as
households with annual income greater than $200,000, paid no income
tax. Adjusted for inflation, $200,000 in 1969 is $1.1 million in
today’s dollars. More letters were written to Congress to complain
about this situation than about the Vietnam War. Subsequently, the
“Minimum Tax” was passed into law. Interestingly, the Minimum Tax
didn’t work very well as five years later, 244 taxpayers with income
above $200,000 paid no tax!
The Alternative Minimum Tax was not
established until 1978. In 1982 the Minimum Tax was repealed and the
AMT was expanded to include most of the items previously covered by the
Minimum Tax. The tax rate of the AMT was originally a flat 20 percent.
In 1986, 1990, and 1993, Congress raised the rate to its current
two-tier schedule, 26 and 28 percent.
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