You Can't Make This Stuff Up!

[Lee Stewart]

America’s tax laws have been in flux for generations and remain so to this day. The first income tax in the United States came about with the Revenue Act of 1861. A flat 3% tax on income above $800 was used to fund the Civil War and repealed 11 years later. In 1894, a new flat federal income tax was ruled unconstitutional by the U.S. Supreme Court. It was not until the 16th Amendment was ratified in 1913 that the federal income tax finally stuck for good.

[Lee Stewart]

Federal tax returns were not always due April 15. In 1913, March 1 was the big day; in 1918 it was moved to March 15; and finally in 1954 the current Tax Day was established as April 15. (Until this year, when it was delayed due to the coronavirus.)

[Lee Stewart]

In the 1940s, the government needed a steady flow of cash to fund the war effort. It passed the Current Tax Payment Act of 1943, which required that companies withhold income taxes from employees' paychecks and make ongoing payments on employees' behalf. Before this (from 1916 to 1943), Americans paid income taxes quarterly or annually.

[Lee Stewart]

Before World War II, few individuals or families owed income taxes. Due to a high personal exemption, only 1.1% of working-age people filed a return, according to the Tax Foundation, and about 17% of those filers did not have to pay income taxes.

[Lee Stewart]

According to the Tax Policy Center think tank, 42.8% of tax filers will owe no individual income tax or have negative taxable income for 2020.

[Lee Stewart]

As of Feb. 21, the average income tax refund was $3,125, according to the Internal Revenue Service. With 48 million individual returns processed, the IRS has paid out more than 37.5 million refunds.

[Lee Stewart]

Collectively Americans paid $5.2 trillion in federal, state, and local taxes last year — more than the combined cost of food, clothing, and housing, according to the Tax Foundation.

[Lee Stewart]

While there's no dodging a federal bill, seven states do not have an income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. New Hampshire and Tennessee tax only dividends and interest income.

[Lee Stewart]

According to the Tax Policy Center, the top 1% of earners in the United States paid 38.8% of all federal individual income tax in 2019. The top 0.1% paid 19% of the total.

[Lee Stewart]

Today, the highest marginal income tax bracket is 37%, but it has been much higher. The Individual Income Tax Act of 1944 raised tax rates to the point where the highest bracket was 94%.