War and Income Taxes: How One Thing Led to the Other
The time, World War II. Although not the first time the United States government attempted to implement an income tax, this was the time it stuck.
Not the first time? Congress had passed previous income tax regulations. Lawmakers were pressured to find funds to pay for war efforts and the income tax provided a relatively easy solution. After the war efforts ended, lawmakers repealed or the court ruled previous income tax regulations unconstitutional.
What changed? Income taxes as we know them did not exist until the 1950s. In the past, the majority of the nation’s economy came from tariffs. In 1913, the 16th amendment allowed Congress the power to collect taxes from income. At that time, the tax rate ranged from one to seven percent.
Shortly afterward, the nation entered World War I. The tax skyrocketed to over 70%. The tax applied to approximately ten percent of the population on income over $300,000 and the rate dropped back down after the war.
Que the next trigger for an increase in income tax: World War II. With this war, the government turned the income tax into a mass tax. As a result, the government expected 75% of the nation’s population to pay income taxes.
Taxpayers reacted with a fairly positive culture around paying income taxes. A encompasses many of the population’s feelings with the lyrics “I paid my income tax today. I never felt so proud before … you see those bombers in the sky? Rockefeller helped them build them but so did I. I paid my income tax today.” Granted, the United States Treasury commissioned Gene Autry to write and perform the song. However, regardless of who paid to produce the song it rose in popularity throughout the country.
Although requirements for reporting income have changed since the income tax first came to be, the foundational requirements remain.
