Infographic: A History of Revolution in U.S. Taxation
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A History of Revolution in U.S. Taxation

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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 By April, all Townshend duties are repealed except for the one on tea.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-$250,0003%
$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:

YearRevenue2019 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.

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Interest Rate Hikes vs. Inflation Rate, by Country

Inflation rates are reaching multi-decade highs in some countries. How aggressive have central banks been with interest rate hikes?

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Interest Rate Hikes vs. Inflation Rate, by Country

Imagine today’s high inflation like a car speeding down a hill. In order to slow it down, you need to hit the brakes. In this case, the “brakes” are interest rate hikes intended to slow spending. However, some central banks are hitting the brakes faster than others.

This graphic uses data from central banks and government websites to show how policy interest rates and inflation rates have changed since the start of the year. It was inspired by a chart created by Macrobond.

How Do Interest Rate Hikes Combat Inflation?

To understand how interest rates influence inflation, we need to understand how inflation works. Inflation is the result of too much money chasing too few goods. Over the last several months, this has occurred amid a surge in demand and supply chain disruptions worsened by Russia’s invasion of Ukraine.

In an effort to combat inflation, central banks will raise their policy rate. This is the rate they charge commercial banks for loans or pay commercial banks for deposits. Commercial banks pass on a portion of these higher rates to their customers, which reduces the purchasing power of businesses and consumers. For example, it becomes more expensive to borrow money for a house or car.

Ultimately, interest rate hikes act to slow spending and encourage saving. This motivates companies to increase prices at a slower rate, or lower prices, to stimulate demand.

Rising Interest Rates and Inflation

With inflation rates hitting multi-decade highs in some countries, many central banks have announced interest rate hikes. Below, we show how the inflation rate and policy interest rate have changed for select countries and regions since January 2022. The jurisdictions are ordered from highest to lowest current inflation rate.

JurisdictionJan 2022 InflationMay 2022 InflationJan 2022 Policy RateJun 2022 Policy Rate
UK5.50%9.10%0.25%1.25%
U.S.7.50%8.60%0.00%-0.25%1.50%-1.75%
Euro Area5.10%8.10%0.00%0.00%
Canada5.10%7.70%0.25%1.50%
Sweden3.90%7.20%0.00%0.25%
New Zealand5.90%6.90%0.75%2.00%
Norway3.20%5.70%0.50%1.25%
Australia3.50%5.10%0.10%0.85%
Switzerland1.60%2.90%-0.75%-0.25%
Japan0.50%2.50%-0.10%-0.10%

The Euro area has 3 policy rates; the data above represents the main refinancing operations rate. Inflation data is as of May 2022 except for New Zealand and Australia, where the latest quarterly data is as of March 2022.

The U.S. Federal Reserve has been the most aggressive with its interest rate hikes. It has raised its policy rate by 1.5% since January, with half of that increase occurring at the June 2022 meeting. Jerome Powell, the Federal Reserve chair, said the committee would like to “do a little more front-end loading” to bring policy rates to normal levels. The action comes as the U.S. faces its highest inflation rate in 40 years.

On the other hand, the European Union is experiencing inflation of 8.1% but has not yet raised its policy rate. The European Central Bank has, however, provided clear forward guidance. It intends to raise rates by 0.25% in July, by a possibly larger increment in September, and with gradual but sustained increases thereafter. Clear forward guidance is intended to help people make spending and investment decisions, and avoid surprises that could disrupt markets.

Pacing Interest Rate Hikes

Raising interest rates is a fine balancing act. If central banks raise rates too quickly, it’s like slamming the brakes on that car speeding downhill: the economy could come to a standstill. This occurred in the U.S. in the 1980’s when the Federal Reserve, led by Chair Paul Volcker, raised the policy rate to 20%. The economy went into a recession, though the aggressive monetary policy did eventually tame double digit inflation.

However, if rates are raised too slowly, inflation could gather enough momentum that it becomes difficult to stop. The longer high price increases linger, the more future inflation expectations build. This can result in people buying more in anticipation of prices rising further, perpetuating high demand.

“There’s always a risk of going too far or not going far enough, and it’s going to be a very difficult judgment to make.” — Jerome Powell, U.S. Federal Reserve Chair

It’s worth noting that while central banks can influence demand through policy rates, this is only one side of the equation. Inflation is also being caused by supply chain issues, a problem that is more or less outside of the control of central banks.

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Mapping the Migration of the World’s Millionaires

This graphic maps out the migration of millionaires across the globe, showing the top 10 countries the ultra-rich are moving to and from.

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Mapping the Migration of the World’s Millionaires

Throughout 2022, a projected 88,000 millionaires will move to a new country, according to the latest Henley Global Citizens Report.

Which countries are these millionaires moving to, and where in the world are they coming from?

This graphic maps the migration of high net worth individuals (HNWIs)—people with a net worth of over US$1 million—showing where rich people are flocking, and where they’re fleeing.

Migration of Millionaires is Back

Before diving into the country-specific data, it’s worth taking a step back to look at overall millionaire migration trends, and how things are changing this year.

2020 saw a drastic drop in the number of millionaire migrants, as pandemic-induced lockdowns kept people from leaving their home countries—and at times, their homes in general.

But as restrictions ease and countries begin to open up their borders again, the migration of millionaires is beginning to gather steam once again:

Year# of HNWIs that migratedY-o-y change
2018108,00014%
2019110,0002%
202012,000-89%
202125,000108%
2022P88,000252%
2023P125,00042%

Below, we’ll dive into which countries are seeing the highest number of HNWI migrants, and which ones are losing the most HNWIs.

Which Countries Are Millionaires Leaving?

There are a plethora of reasons why the ultra-rich move countries. Escaping conflict is one of them, which is why it’s no surprise to see Russia and Ukraine are projected to see some of the biggest emigration numbers by the end of 2022.

Here are the top 10 countries by millionaire outflows:

CountryProjected net outflows of HNWIs (2022)% of HNWIs lost
🇷🇺​ Russia15,00015%
🇨🇳​ China10,0001%
🇮🇳​ India8,0002%
🇭🇰 Hong Kong3,0002%
​🇺🇦 Ukraine2,80042%
​🇧🇷​ Brazil2,5002%
🇬🇧​ UK1,5000%
🇲🇽​ Mexico8000%
🇸🇦 Saudi Arabia6001%
🇮🇩 Indonesia6001%

Figures rounded to the nearest 100.

While Russia is expected to see 15,000 millionaires leaving the country, Ukraine is projected to experience the highest loss in percentage terms—a whopping 42% of its HNWIs could leave the country by the end of 2022.

China could also see a big loss in its millionaire population, with a projected loss of 10,000.
According to Andrew Amoils, Head of Research at New World Wealth, this could be more damaging to the country than in previous years, since general wealth growth in China has declined recently.

Where Are The Ultra-Rich Moving?

The United Arab Emirates (UAE) has become a millionaire magnet, with a projected 4,000 HNWIs flowing into the country by the end of 2022. This influx of ultra-wealthy people is partly because of the country’s accommodating immigration policies that are specially tailored to attract private wealth and international talent.

Here are the top 10 countries that saw millionaire inflows:

CountryProjected net inflows of HNWIs (2022)% of HNWI Gained
​​🇦🇪​ UAE4,0004%
🇦🇺​ Australia3,5001%
🇸🇬 Singapore2,8001%
​🇮🇱 Israel2,5002%
​​🇺🇸 USA1,5000%
​🇵🇹​ Portugal1,3002%
🇬🇷​ Greece1,2003%
🇨🇦​ Canada1,0000%
🇳🇿​ New Zealand8001%

Australia continues to attract HNWIs, coming in second behind the UAE. According to New World Wealth, approximately 80,000 millionaires have moved to the Land Down Under in the last two decades.

A few things that attract migrants to Australia are the country’s low costs of healthcare, its lack of inheritance tax, and its generally prosperous economy.

Where does this data come from?

Source: Henley Global Citizens Report 2022

Data notes: As countries reopen, and the invasion of Ukraine wears on, this will have ripple effects on where people choose to live. There are two main things to keep in mind when view the information above. 1) Individuals need to remain in a country for six months in order to be updated in the database. In many cases, it’s not yet clear where people leaving certain countries choosing to relocate. 2) In the graphic above, we’ve visualized the top 10 countries for inflows and outflows.

 

Update: This article and graphic have been updated to more clearly explain what’s being shown, and list the data source in a more prominent way. We appreciate your feedback.

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