“Do we have to?”
I was in the sixth grade. Our elderly teacher had just given us an assignment. One of my classmates started whining, and asked if it was really required for us to do it. The teacher shook her head and replied sincerely: “No. There’s only two things you have to do. Die and pay taxes.” Thus, I learned at a fairly young age the importance of paying taxes and would continue to hear versions of this truism throughout my adult years.
The quote’s original version is attributed to Benjamin Franklin, yet he wasn’t referring to the establishment of a tax system in the young country. He was asserting how little can be certain at all in this world of ours, including the newly formed Constitution. In 1789, Franklin wrote in a letter: “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”
Franklin actually borrowed this phrase from Christopher Bullock’s The Cobbler of Preston (1716) which is, according to Wikipedia, “the earliest known iteration.”
A character in The Cobbler of Preston exclaims: “You lie, you are not sure; for I say, Woman, ‘tis impossible to be sure of any thing but Death and Taxes.”
Many others have borrowed the quote in some form or another throughout history. One of the notables is Will Rogers, who said: “The difference between death and taxes is death doesn’t get worse every time Congress meets.”
As April 15th approaches, the adage about the certainty of taxes is on many working folks’ minds. These days, the tax system is a mind-boggling maze that confuses even the most astute. Furthermore, looking back on the history of taxation, we find that paying taxes is not only as old as civilization, but is deeply ingrained in our culture, religion, and folklore.
The First Taxes
The first record of income taxes can be traced back to Ancient Egypt. About 5000 years ago, the Pharaoh collected an income tax of 20% of all grain harvests. Egypt used grain as currency because they had no coined money at this time.
Ancient Rome had a system of taxation far more complicated, and thus beyond the scope of this article. Roman taxes included tariffs, property taxes, sales taxes, and income taxes. One of the more famous references to taxation during Roman times will be familiar to many Christians and others who know the origins of Christmas. In the New Testament, according to Luke (2:1-7), Joseph and the very pregnant Mary were searching for an inn in Bethlehem because of taxes. Joseph was required to travel to his hometown to register as part of a census that would efficiently tax everyone in the Roman Empire. With “no room in the inn,” the baby was born in a manger. The origins of Christmas would be told quite differently if not for the Roman Empire’s new efficient tax system.
Perhaps many of us first formed a negative association with taxation when we read or watched the movie, Robin Hood. Set in 12th century England, Robin Hood was famous for his generosity to the poor. Meanwhile, his nemesis, the Sheriff of Nottingham, was cast as a mean tyrant, requiring unaffordable taxes of these same poor of Sherwood Forest.
Within 100 years after Robin Hood’s time, specifically in 1215, England introduced the Magna Carta and its revolutionary concept that the king couldn’t levy new taxes without consent of the governed. For this to work, the governed would require representation.
“No Taxation Without Representation!”
One of the earliest stories of our American government is literally a story of taxes. Had the colonists not been fed up with paying taxes to King George without consent, or representation, we might have stayed under British rule much longer. The 1773 Boston Tea Party was a protest against Britain’s taxation, and the first major act of defiance to British rule. It also led to the 13 colonies fighting a war for our independence, AKA the American Revolution.
Of course, the excise taxes, or sales taxes on specific items, that colonists paid to Britain are quite different from the income tax we associate with April 15th. In fact, colonists didn’t pay any taxes on earnings. Zero. None. Nada.
The Birth of the Federal Income Tax
Following the American Revolution, taxation was understandably a touchy subject. So much so that direct taxation was prohibited in the Constitution. Instead, the new government earned money from tariffs and duties on liquor, tobacco, sugar, and legal documents.
It wasn’t until 1861, when the government needed more money to fund the Civil War, that the first income tax was imposed on Americans. This was originally a flat 3% tax on all incomes over $800. Ten years later, Congress repealed the income tax.
In the ensuing years, Congress would reconsider the idea of income tax, struggling over issues such as tariffs and fairness to the poor, as well as advantages to businesses over farmers. Both Democratic and Republican presidential candidates of the late 19th century included an income tax plank. In 1913, due to declining tariff revenues and to shift tax burdens onto the wealthy, the 16th Amendment was ratified, allowing federal taxes to be levied on individual and business incomes.
In 1913, the exemptions and deductions were so generous that less than one percent of the population paid any income taxes. The top tax bracket was 7% on all income over $500,000 ($11 million in today’s dollars); and the lowest tax bracket was 1%.
The World Wars led to the expansion of the federal income tax to boost the national budget. In addition, this period led to various new taxes such as the estate tax (1916), the gift tax (1924) and Social Security payroll taxes (1937). The first state sales tax began in 1930 in Mississippi as a response to lower property tax collections during the Great Depression. State sales taxes quickly spread to other states.
Expanding the federal income tax led to increases that peaked in 1944, when top taxpayers paid a rate of 94% on their taxable income. The top rate stayed above 90% from 1944 through 1964, when a period of income tax rate decline began. The decline continued until 1987. From 1987 to the present, the top income tax rate has been fluctuating between 30% to 40% on taxable income.
We might look longingly back on that 1913 era of 7% taxes. We might gasp in horror at the 94% peak in 1944. We might even question if paying taxes is as “certain as death” as it used to be. One thing is for certain, to quote a great mind: “The hardest thing in the world to understand is the income tax.” – Albert Einstein
Amy McGarry grew up in Spokane Valley, Washington. After a 20 year hiatus, she moved back to Spokane Valley where she lives with her husband, daughter and two cats. She is the author of “I am Farang: Adventures of a Peace Corps Volunteer in Thailand” available on Amazon.com, Auntie’s Bookstore, and Barnes and Noble.
