History

A History of Revolution in U.S. Taxation

Published

4 years ago

April 8, 2019

Jenna Ross

As Benjamin Franklin once said, “Nothing is certain except death and taxes.”

While this quote was penned in 1789, his words still ring true today. U.S. taxation has changed over time, but it has always existed in some shape or form for over 250 years.

U.S. Taxation: 1765 to Today

In today’s infographic from New York Life Investments, we explore the history of U.S. taxation – from its colonial roots to its recent reform.

A History of Revolution in U.S. Taxation

The modern American tax code has little resemblance to its early iterations.

Over the last few centuries, Americans have battled against British taxation, faced sky-high tax rates to fund war efforts, and enjoyed tax cuts designed to boost economic growth.

A Timeline of U.S. Taxation

Today, total U.S. tax revenue exceeds $3.4 trillion. Below are some notable events that have shaped modern American taxation.

Colonial Roots: 1765 to 1783

1765 – Stamp Act
In its first direct tax on the colonists, Britain places a tax on all paper – including ship’s papers, court documents, advertisements, and even playing cards.

1767 – Townshend Revenue Act
Importation duties are placed on British products such as glass, paint, and tea. The taxes are expected to raise £40,000 annually, (£6,500,000 in 2018 GBP). As hostilities continue to bubble up, colonists argue for “No taxation without representation”. Although taxes are imposed on the colonists, they aren’t able to elect representatives to British parliament.

1770 – The Boston Massacre
British troops occupy Boston to end the boycott on British goods. The March 5th Boston Massacre sees five colonists killed. By April, all Townshend duties are repealed except for the one on tea.

1773 – The Tea Act (May 10)
Britain grants the struggling British East India Company a monopoly on tea in America. While no new taxes are imposed, this angers colonists as it is seen as a thinly veiled plan to gain colonial support for the Townshend tax while threatening local business.

1773 – The Boston Tea Party (December 16)
Three ships arrive in Boston carrying British East India Company tea. Colonists refuse to allow the unloading of the tea, throwing all 342 chests of tea into Boston Harbour.

1775-1783 – The American Revolutionary War
Growing tensions between Britain and the colonists erupt in a full-scale war. After eight long years, Britain officially recognizes the independence of the United States.

A Free Nation: 1787 to 1943

1787 – The U.S. Constitution
Congress gains the “power to lay and collect taxes, duties, imposts, and excises.” The government primarily earns revenue from excise taxes and tariffs, including an “importation tax” on slaves.

1791-1794 – Whiskey Rebellion
Alexander Hamilton, the nation’s first Secretary of Treasury, leads the implementation of a whiskey excise tax. In 1794, whiskey rebels destroy a tax inspector’s home. President Washington sends in troops and quells the rebellion.

1862 – The Nation’s First Income Tax
To help pay for the Civil War, President Lincoln legislates the nation’s first income tax.

Income level (1862 dollars)	Income level (2019 dollars)	Tax Rate
$600-$10,000	$15,000-$250,000	3%
$10,000+	$250,000+	5%

Over the coming years, income tax is repealed and reinstated twice.

1913 – 16th Amendment
As World War I looms the 16th amendment is ratified, allowing for taxation without allocation according to state populations. An income tax is permanently introduced for both individuals and corporations, and the first Form 1040 is created.

Income Level (1913 dollars)	Income level (2019 dollars)	Tax Rate
$3,000+	$77,000+	1%
$500,000+	$12,800,000+	7%

At this time, less than 1% of the population is paying income tax.

1918 – The Revenue Act
Tax rates skyrocket to pay for World War I efforts. The top tax rate is 77%.

1935 – Social Security Act
In light of the Great Depression, the Social Security Act introduces:

An old-age pension program
Unemployment insurance
Funding for health and welfare programs

To fund the programs, a 2% tax is shared equally by an employee and their employer.

1942 – The Revenue Act
Described by President Roosevelt as “the greatest tax bill in American history”, the Act increases taxes and the numbers of citizens subject to income tax. Total personal and corporate income tax revenue more than doubles:

Year	Revenue	2019 dollar equivalent
1941	$3.4 billion	$59.2 billion
1942	$8.0 billion	$123.8 billion

1943 – Current Tax Payment Act
It becomes mandatory for employers to withhold taxes from employees’ wages and remit them four times per year.

Modern Times: 1961 to 2018

1961 – Beginning of The Computer Age
The National Computer Center at Martinsburg, West Virginia is formally dedicated to assisting the IRS in its shift to computer data processing.

1986 – Tax Reform Act
The Tax Reform Act:

Lowers the top individual tax rate from 50% to 28%
Increases taxes on capital gains from 20% to 28%
Reduces corporate tax breaks

The revisions are designed to make the tax code simpler and fairer.

1992 – Electronic Filing
Taxpayers who owe money are given the option to file electronically.

2001 – Economic Growth and Tax Relief Reconciliation Act
President George W. Bush implements large tax cuts:

Creates a new lowest individual tax rate of 10%
Reduces the top individual tax rate from 39.6% to 35%
Doubles child tax credit from $500 to $1,000* (*From $700 to $1,400 in 2019 dollars)

2017 – Tax Cuts and Jobs Act
President Trump signs off on reductions in tax rates, while some deductions are made more restrictive.

For example, State and Local Taxes (SALT) deductions are capped at $10,000. Residents in high-tax states such as New York, New Jersey, California and Connecticut could see substantially higher tax bills.

The Future

U.S. taxation policy remains a contentious issue and shifts depending on who is in the White House.

Investors need to stay informed on current legislation, so they can engage in proactive financial planning and minimize their tax obligations.

Related Topics:taxation American revolution U.S. taxation U.S. tax history united states tax

Up Next

The Most Valuable Agricultural Commodity in Each State

Don't Miss

Mapping the Spread of Words Along Trade Routes

Click for Comments

History

Mapped: European Colonial Shipping Lanes (1700‒1850)

This map plots the colonial shipping lanes used by the British, the French, the Spanish, and the Dutch in the 18th and 19th centuries.

Creator Program

Published

5 days ago

May 26, 2023

Freny Fernandes

European Colonial Shipping Lanes (1700‒1850)

Every year, thousands of ships ferry passengers and transport goods across the world’s oceans and seas.

200 years ago, the ships navigating these waters looked very different. Explorers and traders sailed from coast to coast to expand colonial empires, find personal riches, or both.

Before modern technology simplified bookkeeping, many ships kept detailed logbooks to navigate, tracking the winds, waves, and any remarkable weather. Recently, these handwritten logbooks were fully digitized into the CLIWOC database as part of a UN-funded project by the University of Madrid.

In this graphic, Adam Symington uses this database to visualize the British, French, Spanish, and Dutch shipping routes between 1700 and 1850.

Colonial Shipping Lanes

In the 18th and 19th centuries, the British, French, Spanish, and Dutch empires dominated global trade through their colonial shipping lanes.

All four nations sailed across the Atlantic Ocean with some frequency over that timeframe, but these fleets were also very active in the Pacific and Indian Oceans as well.

The table below reflects the record of days spent by digitized logbooks from each nation.

Country	N. Atlantic	S. Atlantic	Indian Ocean	Pacific	All Oceans
🇪🇸 Spain	28,635	11,812	620	1,703	42,770
🇬🇧 U.K.	40,873	17,732	23,106	1,481	83,192
🇳🇱 Netherlands	51,977	23,457	31,759	1,481	108,674
🇫🇷 France	3,930	186	205	896	5,217
Total	125,415	53,187	55,690	5,561	239,853

Does this mean that the Netherlands had the widest colonial reach at the time? Not at all, as researchers noted that there were thousands of logbooks from each country that weren’t able to be digitized, and thousands more that were lost to time. The days simply reflect the amount of data that was available to examine from each country.

But they can still give us an accurate look at critical shipping routes between European countries, their trade partners, and their colonies and territories.

Let’s now take a closer look at the colonial powers and their preferred routes.

The British

The British shipping map shows a steady presence across the Atlantic and the Indian Ocean. They utilized many of Europe’s ports for ease of trade, with strong pre-independence connections to the U.S., Canada, and India.

One of the most frequented shipping routes on the map seen is a triangular trade route that enabled the trans-Atlantic slave trade. This route facilitated the transportation of slaves from Africa to the Americas, raw materials such as sugar, tobacco, and cotton from the American colonies to Europe, and arms, textiles, and wine from Europe to the colonies.

The Spanish

During this period, Spanish maritime trade with its colonies was an essential economic component of the Kingdom of Spain (as with other colonial empires).

We can see the largest concentration of Spanish ships around Central and South America leading up to the Spanish American wars of independence, as those colonies were especially important suppliers of raw materials such as gold, silver, sugar, tobacco, and cotton. There are some lanes visible to Pacific colonies like the Philippines.

The French

Of the four empires, France’s maritime logbooks were the most sparse. The records that were digitized show frequent travel and trade across the North Atlantic Ocean to Canada and the Caribbean.

The French empire at the time included colonies in the Caribbean, Indian Ocean, and West Africa. Their trade routes were used to transport goods like sugar, coffee, rum, and spices, while also relying on the slave trade to maintain plantation economies. The French colony of Saint-Domingue (now Haiti) was one of the world’s wealthiest colonies in the late 18th century.

The Dutch

Dutch shipping routes from the time had the most detail and breadth of any country, reflective of the Dutch East India Trading Company’s position as the world’s dominant company and trade force.

These include massive traffic to the Dutch East Indies (now Indonesia), Cape Colony (now South Africa), and the Guianas in South America.

Interestingly, researchers from Leiden University found that the Dutch empire was a “string of pearls” consisting mostly of strategic trading hubs stretched along the edges of the continents and focused on maritime power.