On Jan. 24, 1916, the Income Tax was ruled constitutional in the United States.
Until 1916, the Federal government was much smaller than it is today, and it received revenue through excise taxes, tariffs, customs, and the sale of public land. These older forms of revenue now account for around 10% of the federal budget. Since 1916, an increasing share of federal revenue has come from the income tax, alongside Social Security and Medicare taxes which were added in the 1930s as part of the New Deal, and which has grown, in the case of Social Security, from 1% of the first $3,000 of income, to 12.4% of the first $128,000 of income.
The government requires that all employees have their taxes withdrawn from their paychecks. Only the self-employed or those with significant other income must pay their own taxes.
When payroll deductions were first implemented, some companies refused, instead paying out the full wages of each employee in cash, and then having them pay back what the company needed to send to the government. They were quickly stopped from doing this.
- Why do you think the government forces businesses to do their tax collecting for them? What would be different if each citizen had to pay his or her own taxes each month, or each year? Would this be a better process? Would it help control government spending?
- Do people (like the Johnny Cash song, After Taxes) like paying taxes? If not, why not?
- The government has other ways of collecting money to spend on programs, such as borrowing. Why might politicians prefer to borrow money to spend, rather than raising taxes?
- What are the long-term consequences of the government collecting less than it spends?
19, Jan. 2018, Income Tax [digital picture]. Retrieved from <timeshighereducation.com>