War & Income Tax

Federal income tax

Since it’s tax season, I decided to do a little reading online about the history of income taxes in the United States. What I found was this: Our taxes are heavily affected by wars that our country is involved in. As I studied,  I made this outline of our income tax history:


1791 – 1802  No income tax at all, although there were “internal taxes” on items such as alcohol, refined sugar, and tobacco.

1812  The War Of 1812 broke out, and taxes were created on gold, silverware, jewelry, and watches to pay for war expenses.

1817 Congress cancelled all internal taxes since the war was over, although there were tariff taxes on imported items. We were able to pay for our government with just tariffs!

1862 Civil War beganand Congress ordered the first income tax, to pay for the war. They also created the office of Commissioner Of Internal Revenue. Sales tax, excise tax, and inheritance taxes were also created. Those who earned $600-$10,000 a year were charged 3% income tax.

1866 The internal revenue service collected more than $310 million dollars in taxes, although the Civil War had wrapped up in April of 1965.

1868 Taxes on tobacco and liquor were started back up.

1872  Congress eliminated personal income tax.

1894  Congress passed a 2% income tax.

1895  The United State Supreme Court ruled that income tax was a violation of the Constitution, and cancelled the income tax.

1913  The 16th amendment to the original Constitution was passed, making it legal for the government to charge individuals and companies income tax. The tax rate was 1% for the poorest, and 7% for anyone making over $500,000 a year.

1914  World War I began. Although the U.S. did not join in the war until 1917, the government started collecting war funds.

1916  Congress passed the Revenue Act, and the top tax bracket was raised from 7% to 15%.

1917 The U.S. jumped into World War I. The War Revenue act was passed, and the top tax bracket was raised to 67%.

1918  The top tax bracket was raised to 77%. Over $1 billion dollars in taxes were collected.

1920 The war was over, but the government had gotten used to the tax money rolling in, and collected $5.4 billion dollars.

1925  The government finally got around to lowering the taxes, seven years after World War I had ended, lowering the top bracket to 25%. This rate continued through 1931.

1932  We were experiencing the Great Depression, and the government needed money for its relief programs. Congress raised the top tax bracket from 25% to 63%.

1939  World War II began. The United States was not involved yet, but started building up its war funds, using the still-high tax rates.

1941  The U.S. entered World War II, using the high taxes its citizens were paying.

1943  The government ordered that income tax be deducted from paychecks, instead of being due at the end of the year. They could not wait to get their money.

1944  The government needed more money to fight the war, and raised the top tax rate to a whopping 94%. Sixty-four percent of Americans had to pay income tax, up from seven percent in 1940.

1945  World War II ended, but the revenue department still collected $43 billion dollars in income tax.

1950  Korean War beganCongress voted to increase income taxes, corporate taxes, and excise taxes. New taxes were created for the sales of televisions and freezers.

1951  Korean War continued. The Revenue Act of 1951 raised the taxes again.

1953 Korean War ended.

1954 The U.S. assumed military responsibility for South Vietnam after the French left.

1955 Vietnam War began. The top income tax rate was 91%, and the lowest rate 20%.

1955 – 1962  Top income tax rate 91%; lowest rate 20%. We became more involved in the Vietnam War.

Mid-1960s through 1970s  Vietnam War continued; the top rate fluctuated but never dipped below 70%.

1973-1975 The U.S. gradually withdrew from the Vietnam War.

1981  The Economic Recovery Tax Act lowered the highest rate down to 50%.

1986  Tax Reform Act passed, promising to drop the top rate down to 28% in 1988.

1990-1991 Persian Gulf War

1990s The top income tax rate was raised to 39.6%.

2001-present  War in Afghanistan 

2001 Economic Growth and Tax Relief and Reconciliation Act dropped the highest tax rate back to 35% for 2003 to 2010. It was later extended through 2012.

2013-2017 Top tax rate was raised to 39.6%.

2018-2019 Still in Afghanistan War. Lowest tax rate is 10%, top tax rate 37%.

I can only look over this wretched list of wars and taxes, and say, “Why, why, why?” We need to have a military to protect our country, but must we always be at war? I will continue to pray for peace, but know in my heart that in this world there will always be a hideous amount of wars, death, and taxes.

A few of the websites I looked at:

https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx

https://www.tax-brackets.org/federaltaxtable/1955

Author: alwaysreading1

I'm just a person with an intense love for reading!

One thought on “War & Income Tax”

  1. Nice writeup. We have a similar history with war and taxes in Canada. I wrote a post about it called Temporary Measures.

    Like

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