”Diamonds” are sometimes used to refer to something that is a precious gem that is not actually tangible. That is what Jamie Dimon, Chairman and CEO of JPMorgan Chase’s ...
The first income tax was in 1862 to fund the Civil War and the top rate was 5%. In 1864 it was doubled to 10%, dropped to 5% in 1867, 2.5% in 1870 and was abolished in 1873. It was, true to its word, a tax to fund the Civil War even though it lasted a little longer than the war. The top rate applied to incomes over $10,000 through 1866. In 1867 the top rate applied to income over $1,000 until 1870 when the income limit was raised to $2,000.
1894 was a significant year when the income tax was reestablished with a 2% top rate on incomes over $4,000 because this “enormous” tax burden was challenged and it went all the way to the Supreme Court. In 1895 that Court declared the income tax unconstitutional. It took until 1913 for the 16th amendment to be ratified making an income tax constitutional. That occurred on February 3, 1913. It then took the geniuses in Congress until October 3, 1913 to enact the first income tax law. It was tacked on to unrelated legislation and was made retroactive to March 1, 1913. Cordell Hull who pushed for the amendment and then introduced this first income tax law under the constitution is considered the Father of the Income Tax. However, this recognition pales to his later accomplishments of serving as FDR’s Secretary of State from 1933 to 1944 and becoming a Noble Prize recipient in 1945.
The power to tax is sometimes called the power to destroy. Without getting involved in that controversy, any rights given to a group is a “power” and many times people want to exercise that power as a way to display their “power” and do so in an unthoughtful and unthought out manner. The evidence of that is pretty clear with the voluminous Internal Revenue Code and its accompanying regulations. Further the income tax form has become so unwieldy that it necessitates the need to engage professionals to have them adequately prepared. I am also willing to wager that over two-thirds of our legislators (who will soon be pondering changes to these laws) are unable to prepare not only their own returns but those of their minor children and they delegate this to paid professionals. While I am sounding off on Congress, many of our 535 legislators do not even take advantage of the charitable tax deduction since they do not reasonably contribute to their own churches, while the wealthy people they bash regularly provide the major funding to almost every charitable organization.
The fairness of the code is also subject to interpretation since two presidents in my lifetime paid at least for one year of their presidency less than $1,000 in income tax. Further, Congress does not, to my knowledge, obtain the input of people that actually prepare tax returns when they write the tax laws. That is big-time stupid!
Getting back to the top tax rates, 1913’s was 7% increasing rapidly to 15% in 1916, 67% in 1917 and 77% in 1918. The top rates then hoovered from 24% to 73% changing 8 times until 1936 when it hit 79%. Then 81% in 1940, 88% in 1942 and 94% for 1944 and 1945. 1946 brought some relief when it was reduced to 86% with a little bouncing around until it hit 91% in 1951, 92% in 1952 and then back to 91% from 1954 through 1963. Since then the top rates have varied from 77% to today’s 37%. Since 1982 the top rate never exceeded 50% and since 1987 it never exceeded 40%. The number of tax brackets for a married couple filing a joint return were as little as one and as many as 55! The top brackets ranged from $1,000 (in 1867) to $5 million (1936 through 1941). For 2020 it is $622.050.
These are individual rates and do not consider corporation tax rates, other federal taxes, state imposed income taxes, add-on taxes such as the net investment income tax, or payroll taxes. It also does not factor in the availability of tax deductions, credits and exemptions which have been tinkered with throughout the years.
This was supposed to be an April Fool article and you might ask, where is the “fool?” Well, it is us since we have people running things that really know not what they do and they do it impulsively, for their own selfish interests, for spite or to show, at least in some of their minds, their importance because they have that “power.”
I hope you enjoyed my sounding off which I started with the good intentions of making this humorous and insightful with a “gotcha” at the end. This ended up as a Vox Populi. I hope you got something out of it. Maybe next year I’ll feel like fooling around with an April Fool blog!
If you have any tax, business, financial, leadership or management issues you want to discuss please do not hesitate to contact me at firstname.lastname@example.org.