Each year, millions of Americans must accumulate their financial records and fill out forms – or pay professionals to do it for them – in order to file their federal tax returns. This is an annual ritual that traditionally takes place in the spring, although in 2020 the Internal Revenue Service extended the April 15 filing deadline by three months due to disruption caused by the epidemic. COVID-19 virus.
For those who complain about having to contemplate these numbered boxes on the IRS 1040 form, they have William Howard Taft to thank. The 27th president of the country, who served only one term from 1909 to 1913, is probably best known for being the heaviest president in the history of the United States and the first to have driven in a limousine. presidential official and for his obsession with golf. But Taft also established federal income tax as a permanent part of American life.
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Abraham Lincoln first imposed an income tax
Taft did not really invent the idea of a federal income tax. It would be Abraham Lincoln, who in 1861 convinced Congress to pass the income law and impose a temporary 3% tax on income over $ 800, as an emergency measure to help finance spending. massive military personnel required by the civil war. This measure could expire in 1872.
The idea of a federal income tax resurfaces after the Panic of 1893, an economic downturn so severe that it caused the loss of a quarter of the national workforce. As Jeffrey Rosen notes in his 2018 biography of Taft, the populist Democrats argued that the excise tariffs and taxes on which the government depended for its revenues placed a disproportionate burden on struggling farmers and workers, and argued for a tax that would capture more affluent Americans ” income.
In 1894, they joined forces with progressive Republicans to pass a law creating a 2% tax on income over $ 4,000, as well as reduced rates. But this tax did not last long. In an 1895 case, Pollock v. Farmers ‘Loan and Trust Company, the Supreme Court found that direct taxation of Americans’ income was unconstitutional.
Even so, the desire of the progressives to pass an income tax and to reduce the taxation of imports and sales taxes has not died out. When Taft succeeds Theodore Roosevelt as president in 1909, he faces a dilemma.
“Taft was a progressive Republican with moderate instincts”, Joseph J. Thorndike, director of the Tax History Project and author of numerous books and articles on the history of American taxation, explains. “He was also an institutionalist, especially when it came to the Supreme Court.”
Conservatives Oppose Making Permanent Income Tax
Thorndike explains that in 1909 Taft feared that exuberant legislators on both sides would push ahead with plans for a new income tax, ignoring the 1895 court decision that such a tax (at least as previously conceived) was unconstitutional. Taft believed that the enactment of such a tax could undermine the authority of the court.
Debate raged again in Congress, with progressive Democrats and Republicans rallying to support a new income tax, while GOP leaders in the House and the Senate steadfastly opposed the idea.
“Although support for income tax distorted the Democrats, there were also quite a number of Republicans who supported the levy,” said Thorndike.
Taft had been elected in part because people saw him as pursuing the progressive reforms that Roosevelt had initiated, but he was not a big fan of making Americans pay personal income tax as a means of “restricting permanently great wealth, ”as Rosen writes. Instead, he viewed personal income tax as a power that should only be used in emergencies, such as wartime. Taft also feared that citizens who objected to personal taxation would simply refuse to pay and then commit perjury to escape the law.
“I don’t think Taft was ever really enthusiastic about income tax, but he knew he had broad support in both parties,” said Thorndike.
Nevertheless, Taft saw a personal income tax as a political decision that would help him get Congress to get the business tax he needed to replace tariff income, according to David Sicilia, associate professor of history at the University of Maryland, who has written on the origins of federal income tax.
Bypass a Supreme Court decision
“Taft’s objectives with the federal income tax were the reform of tariffs and corporate tax,” says Sicilia. “But the political horse bargaining and an increasingly progressive nation have given us something quite different.”
To get what he needed, Taft had to find a way around the Supreme Court. Otherwise, Taft feared that Congress would simply pass another tax bill and be beaten by the judges. He came up with an ingenious solution – combining tariff reduction legislation with a constitutional amendment allowing the federal government to collect income tax, which the court could not overturn.
Some Conservative opponents of the congressional tax have actually accepted Taft’s idea – apparently because they thought she would be dead on arrival. In July 1909, Congress adopted the 16th amendment to the Constitution.
To the shock of the Conservatives, the amendment was approved by enough state legislatures. In February 1913, US Secretary of State Philander Knox certified its adoption. Shortly thereafter, Congress enacted a federal income tax.
“Taft’s plan has worked, perhaps too well, from the standpoint of many conservatives,” says Thorndike.
In the beginning, most Americans paid no taxes
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As Details of W. Elliot Brownlee in his book Federal Taxation in America: A Short History, the tax set a basic rate of 1% on personal income, but also set a personal exemption of $ 3,000 which exempted practically the entire middle class. For income over $ 20,000, he imposed an additional surcharge of up to 6%. In the first tax years, only 2% of American households paid taxes. (This is the first federal income tax form from the National Archives.)
Initially, federal tax day was March 1, but in 1918, Congress changed it to March 15. In 1955, Congress moved it back a month, to April 15. The 90-day postponement by the federal government of tax day in 2020 is not entirely unprecedented. In 1980, Congress gave families of Iranian hostages more time to file their returns, and in 1992, a similar extension of forms and taxes was granted to some Los Angeles taxpayers who had been affected by the riots in this city.