History Of The Federal Income Tax

The powers of Congress and the limitations on those powers set forth in Article I of the Constitution of the United States. Section 8 specifies both the power to collect, "Taxes, Duties, Imposts and Excises," and the requirement that "duties, imposts and excises shall be uniform throughout the United States."
One of the main concerns of the Constitutional Convention was to limit the powers of the Federal Government. Among the limited powers was the power of taxation. It was thought that head taxes and property taxes (slaves could be taxed as one or both) were exposed to abuse, and had no connection with the activities in which the federal government had a legitimate interest. The fourth clause of Article 9 specifies that therefore, "No capitation or other direct tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken."
The courts have generally held that direct taxes are limited to taxes on people (variously called capitation, poll tax or head tax) and property. (Penn Mutual Indemnity Co. v. CIR, 227 F.2d 16, 19-20 (3rd Cir. 1960).) Other taxes are commonly referred to as "indirect taxes", since a tax event, rather than a person or property per se. (Steward Machine Co. v Davis, 301 U.S. 548, 581-582 (1937).) What appeared to be a direct limitation on the power of the legislature based on the tax issue was inaccurate and misleading when applied to an income tax, which can be seen as either questionable direct or indirect consequence of a tax.
To help pay for its war effort in the American Civil War, the U.S. government released its first personal income tax, August 5, 1861 as part of the Revenue Act of 1861 (3 % of total revenues of more than U.S. $ 800; rescinded in 1872). Other income taxes followed, although a 1895 ruling of the Supreme Court, Loan Pollock v Farmers' & Trust Co., said that taxes on capital gains, dividends, interest, rents and similar unapportioned direct taxes on property, and therefore unconstitutional.
The Sixteenth Amendment to the U.S. Constitution eliminated the limitations in Congress, paving the way for the income tax to become the main source of government revenue, but says: "The Congress shall have power to lay and collect income tax, whatever its source derived, without apportionment among the several States, and without regard to any census or enumeration. "
A growing number of citizens seeking to challenge the power of the state to collect taxes to find a way to rule the amendment XVI. Italicized paragraphs below are representative of these efforts:
The lower federal courts sometimes refer to "direct taxes" unapportioned and similar catch phrases to describe the power of Congress to tax income. (See U.S. v. Turano, 802 F.2d 10, 12 (first Cir. 1986). ("The 16th Amendment eliminated the distinction indirect / direct as applied to income taxes.")) This , however, appears to be the stated position of the Supreme Court.
However, despite popular opinion, the 16th Amendment did not give Congress any new taxing powers. In Treasury Decision 2303, the Secretary of the Treasury cited directly to the Supreme Court (Stanton v Baltic Mining Co. (240 U.S. 103)) to say that "The provisions of the 16th Amendment does not grant a new power enforcement "but instead simply banned original congressional power to tax revenues" are removed from the category of indirect taxes, which is affiliated, and placed in the category of direct taxation subject to apportionment. "
The closest the Supreme Court has been said that "whatever source derived" from the amendment extended the taxing power of Congress disagreed Justice Holmes' in Evans v Gore (253 U.S. 245, 267 (1920). (Dissent Holmes) (partially overruled by U.S. Hatter v. 532 U.S. 557 (2001), with respect to the above reasoning on the compensation clause.)). In that case, the Court considered the effect of the 16th Amendment had on the compensation clause and in particular whether the compensation of judges illegally reduced by the imposition of income tax. Justice Holmes said that the 16th Amendment: "Congress is empowered to collect taxes on income derived from sources ... [so] I think that the amendment was intended to end the cause and not simply ignore "the result in Pollock. (Id.) Even here, however, said the most restrictive interpretation of the Amendment. (Ibid., 262-263. (Plurality opinion))
The federal revenue statutes echoes the language of the 16th Amendment stating that reaches "all income from whatever source derived" (26 USC s 61.) Including criminal, criminals do not accurately report their income have successfully prosecuted for tax evasion. Because the language of the amendment is clearly intended to limit the jurisdiction of the courts, is not immediately clear why the courts emphasize the words "all income" and ignore the derivation of the whole sentence to interpret this section - except to achieve a desired political result.
The arguments about the meaning of the current income tax has remained for almost 100 years. Courts are reluctant to support a literal reading of the tax laws for potential contributors, as it can lead to tax evasion. Points sole teacher why judicial doctrines used against tax evasion strategies generally
"The use of judicial doctrines to reduce tax evasion is widespread in the field of income taxation There are several reasons for this phenomenon. Central among them is that the courts believe that if the Internal Revenue Code ( "Code") is read literally, unacceptable tax avoidance would become the norm rather than the exception. Whatever perceptual legislator can not anticipate all the events and circumstances that may develop, and, due to language limitations, the laws do not always capture the essence of what is intended. judicial doctrines well fill the void left by the legislature or by the terms of the Code. Another reason for the popularity of these doctrines is that the courts do not want to seem fooled by taxpayers .. . "(Jay A. Soled, Use of judicial doctrines to resolve disputes Transfer Tax, 42 BCL Rev. 587, 588-589 (2001).)
Of course, if the intent of Congress was to get really all income then the simplest way to state s. 61 would be "all income realized yet ***. ***" Instead, s. 61 sources mentions and other sections of the federal tax code actually lists about 20 sources of income that are specifically taxed. (26 USC ss. 861-864.) A common rule of statutory interpretation is the doctrine unius inclusions. This doctrine means "[t] he inclusion of one is the exclusion of another ... This doctrine decrees that where law expressly describes [a] particular situation to which they apply, an irrefutable inference must be held that what is omitted or excluded was intended to be omitted or excluded. "(Black's Law Dictionary 763 (6th ed., 1990).) Since private sources listed as a liability in the tax law, then it is reasonable to infer that other sources of income are tax exempt. This argument is called "861 argument of origin" and the courts refuse to analyze the argument consistent despite holding against him, even going so far as to issue restraining orders against people who publish websites on the subject. (U.S. v. Bell, 238 F.Supp.2d 696, 698 (MD Pa. 2003).''
In 1913 the tax rate was 1 percent on net taxable income over $ 3,000 ($ 4,000 for married couples), less deductions and exemptions. It rose at a rate of 7 percent on income above $ 500,000.
During World War I, the top rate rose to 77 percent, after the war, the top rate was reduced (to a minimum of 25 percent).
During the Great Depression and World War II, the top tax rate rose again, reaching 91% during the war, this maximum rate remained in effect until 1964.
In 1964, the top rate was 70% (1964 Revenue Act), and then to 50% in 1981 (Economic Recovery Act or ERTA tax).
The Tax Reform Act of 1986 reduced the top rate to 28%, while the lowest increase of 11% to 15% (in fact, 15% and 28% became the only two tax brackets) .
During the 1990s the top rate rose again, reaching 39.6% at the end of the decade.
In 2001, the top rate was reduced to 35% and the lowest rate was reduced to 10% in the EGTRRA, or the Economic Growth and Tax Relief Reconciliation Act.
In 2003, JGTRRA Jobs and Growth Tax or Reconciliation Relief Act was passed to extend the 10% tax bracket and acceleration of some of the past changes in EGTRRA 2001.





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