In America, Americans have to pay income tax, but what exactly is income tax? How did the income tax originate? Who created the income tax? and why was it necessary to have an income tax?
Income tax is a tax on the income of the people, businesses, and various other firms. Income tax on individual people are called Individual income taxes, while taxes on businesses are called corporate income taxes, both of these taxes are collected differently. For instance individual taxes are the individual tax on the total income of the individual, while corporate taxes tax the net income of the business.
Now that we know what Income tax is, how did it originate? The
first proposal of income tax was during the War of 1812, this was the time when America was waging a very expensive war against Britain, to try to ease the national debt, the government put into action the first sales tax, this tax was put on gold, jewelry and other various objects. After the war, the taxes on these various goods was taken out.
It was not until
1861, during the time of the Civil War that not just the proposal, but the first personal income tax was put into action in order to help pay for the war, this took place on August 5, 1861, this tax was part of the Revenue Act of 1861. The tax started out at 3% on all net income above $600 a year, but by 1864, the income tax had increased to 5%, 7.5% and 10%, plus a penalty of 10%was put into place for those who did not file a tax return. From here on income tax would be thrown out and then reestablished again, it was not until 1895 that the income tax became a solid tax, never again to disappear although the type of tax did very from President to President and so on, but once the sixteenth amendment was ratified,and the Underwood Tariff Act of 1913 was put into action, the income tax was here to stay.
Now that we know what an income tax is, how it originated, why it originated and when it took affect, who is really responsible for development of the Income tax? Well since the idea of the income tax was shot down in 1812 and the real income tax was not put into action until 1861 during the time of the Civil war, the person who can be given credit for this tax is
Abraham Lincoln although it was not just Abraham's idea, it was also his cabinet and other congressmen who joined in the passing of this tax, but Lincoln did give the final signature that made this tax effective.
In Conclusion income tax is a tax on the
income of the people, businesses, and various other firms. Income tax on individual people are called Individual income taxes, while taxes on businesses are called corporate income taxes, both of these taxes are collected differently. The proposal for income tax first came about in 1812, but it was defeated, it was not until 1861 during the time of the Civil War that the first personal income tax was put into action in order to help pay for the war, this tax was part of the Revenue Act of 1861. The tax started out at 3% on all net income above $600 a year, but by 1864, the income tax had increased to 5%, 7.5% and 10%, plus a penalty of 10%was put into place for those who did not file a tax return. From here on income tax would be thrown out and then reestablished again, it was not until 1895 that the income tax became a solid tax, never again to disappear although the type of tax did very from President to President and so on, but once the sixteenth amendment was ratified,and the Underwood Tariff Act of 1913 was put into action, the income tax was here to stay.