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It's Tax Time

by John J. Fanning

This month, millions of Americans will be digging through drawers and glove compartments looking for receipts and old check stubs in preparation of filing their annual income tax return. If it’s any consolation, this annual hunt has been taking place within civilizations for thousands of years.

Some scholars believe that the great ancient Egyptian civilization collapsed because taxation became too oppressive. The Pharaoh and his scribes placed taxes on just about everything from land and cattle to beer and cooking oil. To make sure people didn’t cheat on their taxes, the scribes would make surprise visits to homes to ensure the right amount of cooking oil was being used and people weren’t using substitutes for oil in an effort to evade tax.

The ancient city-state of Athens imposed poll taxes on foreigners, which they defined as anyone not having both an Athenian mother and father. They charged an annual fee of one drachma for males and one-half drachma for females.

The ancient Romans are thought to have developed the first inheritance tax. Created by Augustus Caesar, the tax went towards creating a pension fund for the Roman military.

In 60 AD, Boadicea, queen of Roman controlled East Anglia, in what would later become England, led an army of nearly a quarter million in revolt against Rome. High on the list of grievances from the rebels was oppressive Roman taxation.

Nearly eighty thousand people were killed before that revolt was crushed.

In colonial America, the English imposed the Molasses Act in 1733, which was generally ignored by colonists who immediately began to smuggle sugar and molasses into the colonies, bypassing tax collectors. The British tried again in 1764 with the Sugar Act and in 1765 with the Stamp Act and, as a result, wound up losing the colonies altogether.

In 1791, U.S. Treasury Secretary Alexander Hamilton imposed an excise tax, which led to the “Whiskey Rebellion”. President George Washington sent federal troops and militia to put down the rebellion.

In 1798, the U.S. thought a war with France was imminent and passed a law imposing a property tax on citizens. This led to the “Fries Rebellion”, which was put down when John Fries, the rebellious leader, was arrested and charged with treason. President John Adams later pardoned Fries, who, ironically, had led one of the militia groups that put down the earlier Whiskey Rebellion.

The first income tax in the U.S. was proposed during the War of 1812 when Congress considered a progressive tax that would run from .08% to 10% depending on level of income. The end of the war in 1815 kept Congress from passing the measure and the tax was never imposed.

In 1861 Congress passed the Tax Act, which again would impose a progressive income tax on Americans, but the tax was never imposed. The following year, another Tax Act was passed and signed into law by President
Abraham Lincoln that imposed a rate of 3% on incomes above $600 per year and a rate of 5% on incomes above $10,000 per year. People were permitted to deduct from their income calculations rent paid or the rental value of their property.

The income tax was imposed as a way to pay for the bloody and costly Civil War being waged in America. While Americans were apparently willing to sacrifice their sons to the war effort, their money was apparently a different matter. After the war ended, the government released figures showing that only 276,661 people filed income tax returns with the government in 1870, while the population of the country was placed at 38 million.

According to economists at the Tax Foundation, in 2006, about 136 million tax returns were filed in the U.S. and of that number, about 91 million filers claimed to owe no federal tax. That same source estimated that 15 million American households failed to file any tax statement at all. When you combine these two numbers, you find that about 121 million Americans or 41 percent of the population pays or owes no income tax. Which, I suppose, might explain why it’s so difficult for U.S. Presidents to fill Cabinet seats.

The Tax Foundation analyzed U.S. tax returns to determine who was more likely to not pay or owe income tax. According to the findings, over 42 percent of single people were non-payers compared to 30 percent of married people filing joint returns.

The researchers ranked non-payers by state and found that the state with the most citizens not paying federal income tax was Mississippi, where 46 percent of their citizens contributed zero or had no tax liability in 2006.

At the other end of the spectrum was Alaska, where only 20 percent of their citizens did not pay federal tax. Alaska is relatively new to the union and I suppose the people there just haven’t caught on to this whole income tax thing yet.

Americans will be expected to pay more taxes in the future, which will be needed to pay off federal debt incurred over the past few years. If it’s any consolation to you, inflation will make the money repaid of less value than the money the government initially spent.

Only about 40 percent of Americans prepare their own tax returns while around two-thirds of all tax filers take standard deductions and could, therefore, file simple tax returns.

An even better idea and a way to increase the number of Americans paying taxes would be to do away with the tax preparation for all the people filing simple returns. Your employers and your banks are all required to report your income and interest earnings already. So really, when a citizen files their income tax statement, they are providing the same information twice to the IRS.

It would be much easier and save billions of dollars if the IRS took the information provided by employers and banks, did the tax calculations and simply sent a bill. Naturally, if people disputed the calculations done by the IRS, there would be some provisions for appeal and people could file their own amended return.

By and large, most people would agree and pay the IRS tax bill, which would eliminate a lot of headaches for Americans, save billions of dollars and allow people to actually enjoy the onset of spring instead of dreading the rigors of tax preparation.

Of course, all that makes too much sense to actually be taken seriously by government.

Personally, I have never minded paying income tax to the government. I only dread seeing the government waste money on things I think are stupid. I used to believe that most Americans probably felt the same way I do. But now of course, I know that many Americans won’t be paying any income tax this year.

I think the European Union has it right with their Value Added Tax. Instead of deducting income tax from workers paychecks, we could give every American an immediate boost in their take home pay and impose a VAT on
purchases. Rich people who buy more things would pay more VAT and poor people who buy less would pay less. More importantly, nobody would ever have to worry about filing returns or missing deadlines. Billions of dollars would be saved and tax would be fairly assessed to everyone.

But again, that idea makes too much sense to be taken seriously as well.

So this month, like you, I will be scrambling to get all my receipts, bank statements and other forms together so I can turn them over to my accountant and worry for days about what he will tell me I owe to Uncle Sam.
After April 15th, I will notice the flowers and budding trees. I will think about baseball and bicycles, long walks in the park, barbeques and all sorts of wonderful summer fun.

But not until then.

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