Every time tax season comes around; you may be wondering to yourself, “Where did the concept of taxes come from?”
The concept of paying taxes is not new. The first known taxation system recorded in history was in Ancient Egypt, around 3000-2800 BC, during the First Dynasty of the Old Kingdom.
The Bible even depicted taxation at work. In Genesis, Joseph told the people of Egypt how to give a portion of their crops to the Pharaoh, who would collect the crops as a buffer against unexpected famines.
Taxes and taxation have played a large role in shaping the history of the United States. During the colonial period, taxes were generally low.
However, various conflicts arose between the Crown and the colonies throughout the 18th century, culminating in the Boston Tea Party; this was an act of protest by the American colonists against Great Britain for the Tea Act. Dumping many tea chests into Boston Harbor, Americans spoke out against the cuts to taxation on tea that had driven American smugglers out of work.
The First Income Tax Law
The first income tax law came into being in 1861, just as the Civil War was heating up. To pay for the war effort, Congress established the Revenue Act of 1861—which levied a 3% tax on incomes over US$800 as well as the Revenue Act of 1862 which levied a 3% tax on incomes above US$600.
The passage of the 16th Amendment in 1913 granted the federal government the ability to tax citizens’ income. The tariffs were designed to protect and strengthen the American cotton, steel, and iron industries, to make it easier for Americans to compete on the rapidly industrializing world stage.
Then and Now
Throughout the 20th and 21st centuries, the top marginal tax rate increased steadily, from a 7% tax on net personal incomes in 1913 to 35% in 2010 and a slight increase to 37% percent as recently as 2020.
The government also instituted a variety of other taxes throughout the 20th century, such as the estate tax created to fund the US Navy and the Social Security Act of 1935; Congress created the act to provide financial security for Americans of retirement age.
Our current income tax model is progressive, and despite what you’d hear from many outlets the majority of higher earners pay much higher taxes. Statistics from the IRS have suggested that in 2018, the top 1% of all income earners reported 20% of the US’s income but paid 37% of the taxes. Further, the top 50% of all taxpayers paid 97% of all taxes.
Therefore, taxes are more than a necessary evil—they are a form of civic participation. As Americans, we pay taxes to help our fellow citizens, to ensure that the government has the adequate resources to protect our current way of life.
Otherwise, how will our government fund the Navy, the Army or ensure our roads are up to standard? There is a saying that freedom comes at a price—we all must pay our fair share, regardless of our income.