One Busy Guy Presents...

        A Little History of the IRS 

Taxes and governments go together like peanut butter and jelly. Americans dutifully collate statements of their earnings for the Internal Revenue Service every April. Most personal taxes are paid through payroll withholdings while for the self-employed individual it generally means a hefty annual outlay. Of course you know this already. I decided to do a little poking around for things you might not know and found several interesting articles about where the IRS came from and how it evolved into its' present incarnation.

A founding tenet of the good ole USA was freedom from taxation but our forefathers actually started paying taxes as early as 1746. I think things started to get a little testy in 1765 when the Stamp Act required stamps to be attached to legal documents etc. However, it was in 1773 that the Tea Act became the last straw prompting a band of colonists disguised as Indians to dump something like 350 crates of the stuff into Boston harbor creating an effective and memorable protest. 

One of the first acts of our new government was to embark upon a grand effort to compensate those countries who assisted in winning our independence. So in 1778 the small group of colonies levied the 'sin' taxes on tobacco, sugar and distilled spirits among other items. This worked fairly well into the 1800's apart from the Whiskey Rebellion of the mid 1790's and the infamous 'revenuers'. When the war debts were declared paid in full President Thomas Jefferson eliminated all existing internal taxes making him perhaps the most popular statesman in history. 

Then along came the Civil War. This was a tremendously expensive conflict for a fledgling nation. Congress could only finance it by enacting the first tax on personal income which it did in 1861. Incredibly, Congress had already dismantled the Income Tax system by 1872, but 19th century nationwide expansion generated additional debt and so in 1894 the income tax was revived. It encountered a partisan battle almost immediately and was declared unconstitutional only one year later in 1895. So I'm thinking that the turn of the century was relatively tax free. Certainly the 'old money' of today began accumulating way back then.

Money troubles worsened dramatically in the first 10 years of the new century and on February 13, 1913 President Taft signed the 16th amendment to the constitution into law granting congress the power to levy and to collect operating expenses as a tax on income. That was the inauspicious beginning of our modern system. Additionally during the 2nd world war congress passed a law requiring employers to withhold from salaries and wages those taxes owed by their employees.

The US Government has become the epicenter of money on this planet. A great deal of controversy exists surrounding waste and spending and corruption, cronyism and the cost of political campaigns. Federal government debt has ballooned to some $14 trillion in only the recent 15 years. Our legislators squabble and wring their hands and pontificate about spending and entitlements with no solution in sight. It seems the congress is not capable of managing the public trust.

It started as a 1% tax on net personal income over $3000. Now the tax code is some 3 million words in length. The code is now so complicated that tax payers who do not have an accountant use... you guessed, Turbo Tax. As an institution the IRS has been mired in controversy and even a few scandals. Abuses have led to several congressional investigations and citizen's rights advocates continue to be vigilant. I think it's true what they say about the only two certainties in life... death and taxes.