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Why We Pay Income Taxes

Once upon a time there was a war known as the Civil War. This war was between different parts of the country about ideology and how people should live, power, slavery and race, the haves and the have-nots, the North and the South. War unfortunately costs money and the country needed to raise revenue to pay the Civil War expenses so President Lincoln signed a revenue-raising law and created the nation’s first income tax in 1862 with a graduated tax rate. It was a 3% tax on incomes between $600 and $10,000 and a 5% tax on incomes of more than $10,000.

The telling of this tale of taxes is unfortunately not a child's storybook tale but there have been many big bad wolves around for years huffing and puffing and blowing hot disagreeable taxing air.

In 1872 the income tax was repealed only to be revived in 1894 and in 1895 it was again repealed. In 1909 President Taft came along with a constitutional amendment that revived the income tax and at that time congress also levied a 1% tax on net corporate incomes over $5,000.

As World War I loomed in 1913 Congress adopted a 1 percent tax on net personal income of more than $3,000 with a surtax of 6 percent on incomes of more than $500,000 and repealed the 1909 corporate income tax. Also, at that time the first Form 1040 was introduced.

In 1918 a progressive income tax structure was adopted. In 1919 the IRS was given the added responsibility of dealing with the primary responsibility for enforcement of Prohibition which they handled until the primary prohibition enforcement duties were transferred to the Department of Justice.

In 1933 when prohibition was repealed the IRS again became responsible for taxation of alcohol. The next year they became responsible for administering the National Firearms Act and at a later time, tobacco tax enforcement was also added as an IRS responsibility

In 1942 the number of Americans subject to tax increased but deductions for medical and investment expenses were added to soften the blow. In 1943 employer tax withholding came into existence. In 1944 the standard deduction first appeared in the tax picture. In 1953 the name of the agency was changed from the Bureau of Internal Revenue to the Internal Revenue Service. In 1961 the Computer Age arrived at the IRS.

So disagreement between - states and different areas of the country, ideology, races, genders, cultures, the haves and have-nots, decision makers on whether to tax or not to tax businesses and individuals and whether to levy taxes to pay for wars and the ever present unethical abusive power seekers - has been around for a very long time. Unfortunately, disagreement begets more disagreement which results in failure to communicate appropriately to resolve problem issues which creates social wars and real life combative wars and taxes.

Taxes are in many ways a result of a communication failure that has existed in our country since 1862. Taxes were levied by Republicans and Democrats and their predecessor parties, not just one or the other. Closed minds create communication failures that ultimately lead to more and more taxes. Now taxes are in all probability not ever going to go away completely because they are a major part of how governments keep functioning. They can, however, be viewed more honestly and used more efficiently.

There is really only one way to keep the big bad tax wolf from huffing and puffing and blowing all our houses down. We need to write a new story that deals with facts and figures that are based in reality and not altered by special interests and self-serving individuals, where we are not Republicans, Democrats, Liberals or Conservatives or identified by any party affiliation – where we are all just AMERICANS. Shall we begin here? Once Upon a Time we the American people decided to communicate honestly with each other in an effort to all live happily ever after.

It’s up to you and you and you… communicate calmly and effectively and honestly.

Any U.S. tax advice contained in this electronic communication was not intended or written to be used, nor can be used, by any recipient of this communication for the purpose of avoiding penalties that might be imposed pursuant to the Internal Revenue Code or U.S. Treasury Regulations, or any other state or local law or regulation.

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