| Ms Grumpy |
06-13-2010 02:26 PM |
In thinking of works that began with "in" I thought of the Internal Revenue Service, did you know that the IRS has a colorful and interesting history of war, scandal, politics, corruption, and money. How the IRS came to be, and how it has evolved tell an interesting story.
In July 1862, during the Civil War, President Lincoln and Congress created the office of Commissioner of Internal Revenue and enacted an income tax to pay war expenses. The position of Commissioner exists today as the head of the Internal Revenue Service.
The Revenue Act of 1862 was passed as an emergency and temporary war-time tax. It copied a relatively new British system of income taxation, instead of trade and property taxation. The first income tax was passed in 1861:
* The initial rate was 3% on income over $800, which exempted most wage-earners.
* In 1862 the rate was 3% on income between $600 and $10,000, and 5% on income over $10,000.
* In 1864 the rate was 5% on income between $600 and $5,000; 7.5% on income $5,000-$10,000; and 10% on income $10,000 and above.
By the end of the war, 10% of Union households had paid some form of income tax, and the Union raised 21% of its war revenue through income taxes.
After the Civil War, Reconstruction, railroads, and transforming the North and South war machines towards peacetime required public funding. However, in 1872, seven years after the war, lawmakers allowed the temporary Civil War income tax to expire. The Panic of 1873 happened a year later.
Income taxes evolved, but eventually in 1894, in the midst of a 30-year post-civil-war depression, the Supreme Court declared the Income Tax of 1894 unconstitutional in Pollock v. Farmers' Loan & Trust Co.. The federal government scrambled to raise money.
In 1906, with the election of President Theodore Roosevelt, and later his successor William Howard Taft, the United States saw a populous movement for tax reform. This movement culminated in February 1913 with the ratification of the Sixteenth Amendment to the United States Constitution:
“ "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration." ”
This granted Congress the specific power to create a direct income tax. By February 1913, 36 states had ratified the change to the Constitution. It was further ratified by six more states by March. Of the 48 states at the time, 42 ratified. Connecticut, Rhode Island, and Utah rejected the amendment; Pennsylvania, Virginia, and Florida didn't take up the issue.
A copy of the very first IRS 1040 form, dated 1913, can be found at the IRS website showing that only those with incomes of $3,000 or more were instructed to file (the equivalent of about $65,000 in 2010 dollars).
In the first year after ratification of the Sixteenth Amendment, no taxes were collected--instead, taxpayers simply completed the form and the IRS checked it for accuracy. The IRS's workload jumped by ten-fold, triggering a massive restructuring. Professional tax collectors began to replace a system of "patronage" appointments. The IRS doubled its staff, but was still processing 1917 returns in 1919.
Currently, only the IRS Commissioner and Chief Counsel are political appointees selected by the President and confirmed by the United States Senate.
To this day the agency continues to re-invent itself both organizationally, and technologically.
(I know it is a little long, but what the heck)
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