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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 By April, all Townshend duties are repealed except for the one on tea.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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Mapped: Federal Tax Paid Per Capita Across Canada

We show which provinces and territories pay the most and least tax after adjusting for the number of tax filers in each jurisdiction.

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A Canadian map of federal tax paid per capita with the values for BC, Alberta, NWT, Ontario and Quebec as question marks

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The following content is sponsored by Fidelity Investments

Mapped: Federal Tax Paid Per Capita Across Canada

Which parts of Canada pay the most personal tax? In 2021, according to the latest available data, people in Ontario paid by far the greatest share: 42% of the total. Of course, Ontario is also the most populated province.

But if we look at which parts of the country paid the most and least taxes on a per capita basis, the picture looks different. In this graphic from Fidelity Investments, we show the amount paid per tax filer for each province and territory.

A Breakdown of Tax Per Person

We took the total personal federal tax paid in each province according to 2021 tax filing data from the Canada Revenue Agency. We then divided the total tax paid by the number of people filing taxes in the province. Below, we rank the provinces and territories from least to most taxes on this basis.

Province or TerritoryFederal Tax Paid Per Person
New Brunswick$4,186
Prince Edward Island$4,491
Nova Scotia$4,708
Manitoba$5,001
Newfoundland and Labrador$5,033
Quebec$5,352
Saskatchewan$5,596
Nunavut$6,314
British Columbia$6,828
Yukon$6,897
Ontario$6,969
Alberta$7,608
Northwest Territories$7,876
All of Canada$6,368

All of Canada is calculated as the total federal taxes paid in Canada divided by the total number of tax filers in Canada.

New Brunswick paid the least taxes on a per capita basis. Within the province, 13% of people worked in retail jobs, the highest proportion nationally. Retail positions in New Brunswick earned $34,000 annually on average. As a whole, 71% of people in New Brunswick earned less than $49,000 per year.

The Highest Taxes Per Capita

The Northwest Territories (NWT) paid the most taxes relative to the number of tax filers. Public administration workers made up nearly a quarter of tax filers, four times the national share of 6%. These workers, which include local, provincial, federal, and aboriginal government employees, had an average annual income of $120,000 in the NWT.

Additionally, the territory also had a relatively high proportion of people working in mining, who earned $221,000 a year on average.

However, it’s important to note that the NWT faces a high cost of living. On average, households in the capital city of Yellowknife paid 28% more for food and 47% more for shelter than the average Canadian household in 2021.

On a per person basis, Ontario paid the third highest taxes in Canada. The province had the highest proportion of finance and insurance workers, who earned $106,000 annually.

Reducing Your Taxes

Generally, a higher income leads to higher taxes. However, you can explore allowable deductions such as RRSP contributions to save more of your money.

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Use Fidelity’s income tax calculator to quickly estimate your taxes.

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