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Why We Pay Taxes

April 16, 2018 in History

By Sarah Pruitt

U.S. Department of the Treasury Internal Revenue Service (IRS) 1040 Individual Income Tax forms for the 2017 tax year. (Credit: Daniel Acker/Bloomberg via Getty Images)

Since 1950, individual income taxes have been the primary source of revenue for the U.S. federal government. Together with payroll taxes (used to fund social programs like Social Security and Medicare), income taxes amount to roughly 80 percent of all federal revenue, and are the essential fuel on which our government runs.

The history of income taxes in the United States goes back to the Civil War, when Abraham Lincoln signed into law the nation’s first-ever tax on personal income to help pay for the Union war effort. After it was repealed a decade later, Congress tried again in 1894, enacting a flat rate federal income tax. But the U.S. Supreme Court ruled the tax unconstitutional the following year, because it didn’t take into account the population of each state.

Then in 1909, Congress passed the 16th Amendment, which allowed the federal government to tax individual personal income regardless of state population. The required number of states ratified the amendment in 1913, and Americans have been required to pay federal income taxes ever since.

Who pays taxes, and when?
By law, any American whose gross income is over $10,000 (or $25,000 for married couples filing jointly) or who earned more than $400 from self-employment must file a federal income tax return. There are also a number of other circumstances that might require you to file, including selling your home or owing taxes on money you withdrew from your retirement account. In Puerto Rico, which is a U.S. territory, residents aren’t required to pay federal income tax if their income is only from sources within Puerto Rico, but they do pay Social Security, Medicare, import, expert and commodity taxes, for a total federal tax bill of more than $3 billion per year, according to the New York Times.

Back in 1913, Congress chose March 1 as the official due date for paying taxes, but a few years later they moved it to March 15 (for no apparent reason). In 1955, another tax overhaul pushed back the deadline an entire month, to April 15, giving the government more time to hold on to tax dollars before paying any refunds it might owe. In the case that April 15 falls on a Saturday, Sunday or holiday, Tax Day becomes the first succeeding business day after that …read more


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