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.
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 By April, all Townshend duties are repealed except for the one on tea.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|
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|
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.
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.
This Simple Chart Reveals the Distribution Of Global Wealth
Global wealth at the end of 2020 was about $418 trillion. Here’s a breakdown of the global wealth distribution among the adult population.
The Global Wealth Distribution in One Chart
The pandemic resulted in global wealth taking a significant dip in the first part of 2020. By the end of March, global household wealth had already declined by around 4.4%.
Interestingly, after much monetary and fiscal stimulus from governments around the world, global household wealth was more than able to recover, finishing up the year at $418.3 trillion, a 7.4% gain from the previous year.
Using data from Credit Suisse, this graphic looks at how global wealth is distributed among the adult population.
How is Global Wealth Distributed?
While individuals worth more than $1 million constitute just 1.1% of the world’s population, they hold 45.8% of global wealth.
|Wealth Range||Wealth||Global Share (%)||Adult Population|
|Over $1M||$191.6 trillion||45.8%||Held by 1.1%|
|$100k-$1M||$163.9 trillion||39.1%||Held by 11.1%|
|$10k-$100k||$57.3 trillion||13.7%||Held by 32.8%|
|Less than $10k||$5.5 trillion||1.3%||Held by 55.0%|
|Total||$418.3 trillion||100.0%||Held by 100.0%|
On the other end of the spectrum, 55% of the population owns only 1.3% of global wealth.
And between these two extreme wealth distribution cases, the rest of the world’s population has a combined 52.8% of the wealth.
Global Wealth Distribution by Region
While wealth inequality is especially evident within the wealth ranges mentioned above, these differences can also be seen on a more regional basis between countries.
In 2020, total wealth rose by $12.4 trillion in North America and $9.2 trillion in Europe. These two regions accounted for the bulk of the wealth gains, with China adding another $4.2 trillion and the Asia-Pacific region (excluding China and India) another $4.7 trillion.
Here is a breakdown of global wealth distribution by region:
|Change in Total Wealth |
|Change %||Wealth Per Adult |
India and Latin America both recorded losses in 2020.
Total wealth fell in India by $594 billion, or 4.4%. Meanwhile, Latin America appears to have been the worst-performing region, with total wealth dropping by 11.4% or $1.2 trillion.
Post-COVID Global Outlook 2020-2025
Despite the burden of COVID-19 on the global economy, the world can expect robust GDP growth in the coming years, especially in 2021. The latest estimates by the International Monetary Fund in April 2021 suggest that global GDP in 2021 will total $100.1 trillion in nominal terms, up by 4.1% compared to last year.
The link in normal times between GDP growth and household wealth growth, combined with the expected rapid return of economic activity to its pre-pandemic levels, suggests that global wealth could grow again at a fast pace. According to Credit Suisse estimates, global wealth may rise by 39% over the next five years.
Low and middle-income countries will also play an essential role in the coming year. They are responsible for 42% of the growth, even though they account for just 33% of current wealth.
Mapped: GDP per Capita Worldwide
GDP per capita is one of the best measures of a country’s standard of living. This map showcases the GDP per capita in every country globally.
Mapped: Visualizing GDP per Capita Worldwide
View the high-resolution of the infographic by clicking here.
GDP per capita has steadily risen globally over time, and in tandem, the standard of living worldwide has increased immensely.
This map using data from the IMF shows the GDP per capita (nominal) of nearly every country and territory in the world.
GDP per capita is one of the best measures of a country’s wealth as it provides an understanding of how each country’s citizens live on average, showing a representation of the quantity of goods and services created per person.
The Standard of Living Over Time
Looking at history, our standard of living has increased drastically. According to Our World in Data, from 1820 to 2018, the average global GDP per capita increased by almost 15x.
Literacy rates, access to vaccines, and basic education have also improved our quality of life, while things like child mortality rates and poverty have all decreased.
For example, in 1990, 1.9 billion people lived in extreme poverty, which was 36% of the world’s population at the time. Over the last 30 years, the number has been steadily decreasing — by 2030, an estimated 479 million people will be living in extreme poverty, which according to UN population estimates, will represent only 6% of the population.
That said, economic inequality between different regions is still prevalent. In fact, the richest country today (in terms of nominal GDP per capita), Luxembourg, is over 471x more wealthy than the poorest, Burundi.
Here’s a look at the 10 countries with the highest GDP per capita in 2021:
However, not all citizens in Luxembourg are extremely wealthy. In fact:
- 29% of people spend over 40% of their income on housing costs
- 31% would be at risk of falling into poverty if they had to forgo 3 months of income
The cost of living is expensive in Luxembourg — but the standard of living in terms of goods and services produced is the highest in the world. Additionally, only 4% of the population reports low life satisfaction.
Emerging Economies and Developing Countries
Although we have never lived in a more prosperous period, and poverty rates have been declining overall, this year global extreme poverty rose for the first time in over two decades.
About 120 million additional people are living in poverty as a result of the pandemic, with the total expected to rise to about 150 million by the end of 2021.
Many of the poorest countries in the world are also considered Least Developed Countries (LDCs) by the UN. In these countries, more than 75% of the population live below the poverty line.
Here’s a look at the 10 countries with the lowest GDP per capita:
Life in these countries offers a stark contrast compared to the top 10. Here’s a glance at the quality of life in the poorest country, Burundi:
- 80% of the population works in agriculture
- 1 in 3 Burundians are in need of urgent humanitarian assistance
- Average households spend up to two-thirds of their income on food
However, many of the world’s poorest countries can also be classified as emerging markets with immense economic potential in the future.
In fact, China has seen the opportunity in emerging economies. Their confidence in these regions is best exemplified in the Belt and Road initiative which has funneled massive investments into infrastructure projects across multiple African countries.
Continually Raising the Bar
Prosperity is a very recent reality only characterizing the last couple hundred years. In pre-modern societies, the average person was living in conditions that would be considered extreme poverty by today’s standards.
Overall, the standard of living for everyone today is immensely improved compared to even recent history, and some countries will be experiencing rapid economic growth in the future.
GDP per Capita in 2021: Full Dataset
|Country||GDP per Capita (Nominal, 2021, USD)|
|🇺🇸 United States||$66,144|
|Hong Kong SAR||$47,990|
|United Arab Emirates||$32,686|
|Trinidad and Tobago||$16,622|
|Saint Kitts and Nevis||$16,491|
|Antigua and Barbuda||$14,748|
|Saint Vincent and the Grenadines||$7,401|
|Bosnia and Herzegovina||$6,536|
|West Bank and Gaza||$3,060|
|Papua New Guinea||$2,596|
|Republic of Congo||$2,271|
|São Tomé and Príncipe||$2,133|
|Central African Republic||$522|
|Democratic Republic of the Congo||$478|
Editor’s note: Readers have rightly pointed out that Monaco is one of the world’s richest countries in GDP per capita (nominal) terms. This is true, but the IMF dataset excludes Monaco and lists it as “No data” each year. As a result, it is excluded from the visualization(s) above.
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