Posted 2/19/2016:
The history of the Income, Inheritance, and Corporate Taxes
-- in a Nutshell and Quotes
Early in our history, several colonies instituted the “faculties and abilities” tax, where tax collectors went door to door to collect taxes on income: that did not work very well. It was the first attempt to tax income.
Taxes imposed by the British on the thirteen colonies led to the American Revolution in 1775-83.
The forming of the United States and the ratification of the Constitution in 1788 gave the Congress the power to lay and collect taxes.
The main sources of revenue: tariffs and excise taxes.
The Revenue Act of 1861 enacted the first income tax to fund the Civil War. It was repealed and replaced with the Revenue Act of 1862:
1. It was progressive
2. It made collection at the source
3. It included an inheritance tax
4. And, it established the Office of Commissioner of Internal Revenue— which was tax collecting department--similar to the IRS.
It did not collect enough revenues and Congress passed the Revenue Act of 1864, which increased the marginal tax rates.
After the war, Congress allowed the income tax to expire in 1872. That was part of the Revenue Act of 1870. To replace the lost revenue, it increasing tariffs and excise taxes on alcohol and tobacco.
In 1887, these taxes were part of the Socialist Labor platform:
#11. Progressive income tax and tax on inheritance, but smaller incomes to be exempt.
It was also part of the Populist Party Platform of 1892:
#3. We demand a graduated income tax.
The reason for these two movements: the industrial revolution, the age of the Robber Barons, and growing income and wealth inequality and the need for more government revenues to provide for the general welfare, pay debts, and nation building.
The income tax is like—the appearance of teeth in children--that are needed for getting sufficient nutrition, growth and health. Human teeth from incisors to molars are similar to the graduating income tax: the top set, the law, the lower set, enforcement. Both are necessary and part of natural evolution.
Rep. William Jennings Bryan supported the income tax on the floor of the House Jan. 30, 1894. He said, “If I were consulting my own preference I would rather have a graduated tax, and I believe that such a tax could be defended not only upon principle, but upon grounds of public policy as well; but I gladly accept this bill as offering a more equitable plan for making up the deficit in our revenues than any other each has been proposed.”
In 1894, a Democratic-led Congress passed the first peacetime income tax, despite opposition from republicans.
That did not last long, in 1895, the Supreme Court ruled the tax unconstitutional: citing Article I, Section 9, Clause 4, -- "No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.”
The ruling was 5-4. Was the Supreme Court right? No, Clause 4 was a rule to tax states, as a separate unit, by the federal government, based on the number of people—not land size –or some other measurement. It did not mean to block the taxation of the incomes of individuals and corporations by the federal government.
If, go back to Article 1, Section 2, Clause 3, it states this tax pertained to states which may be included in the union according to their perspective number. It was not referring to a tax on individuals or corporations.
They were a different type of tax.
William Jennings Bryan “Cross of Gold” speech July 8, 1896, said the Supreme Court ruling was wrong and defending the tax, saying, “The income tax is a just law. It simply intends to put the burdens of government justly upon the backs of the people. I am in favor of an income tax. When I find a man who is not willing to pay his share of the burden of the government which protects him, I find a man who is unworthy to enjoy the blessings of a government like ours.”
Despite the Supreme Court ruling, populists and progressives continued to fight to enact an income tax, an inheritance tax, and a corporate income tax.
In 1901, Theodore Roosevelt became president after the assassination of William McKinley and was re-elected in 1904, and in a speech on April 14, 1906, he endorsed a progressive estate tax, saying, “Such taxation should, of course, be aimed merely at the inheritance or transmission in their entirety of those fortunes swollen beyond all healthy limits.”
And, in his message to Congress on Dec. 7, 1907, he said, “In my judgment both of these taxes [the income and inheritance] should be part of our system of Federal taxation.” And, he said, he hoped that a graduating income tax could be devised which the Supreme Court will not declare constitutional.
William Howard Taft was elected in 1909, and said in his inaugural address, “I recommend a graduating inheritance tax is a correct principle and as certain and easy collection.”
In 1909, Congress enacted an excise tax on corporations based on income. It was considered the “privilege of doing business” and became part of the tax code.
In 1910, Theodore Roosevelt said in his New Nationalism Speech: "I believe in a graduated income tax on big fortunes, and...a graduated inheritance tax on big fortunes, properly safeguarded against evasion, and increasingly rapidly in amount with the size of estates."
Democrats and progressives continued to work for the enactment of these taxes and republicans fought to defeat them.
The ratification of the Sixteenth Amendment in 1913, after a hard battle against republicans with ties to wealthy industrialists, gave congress the power to levy tax on income from whatever source derived without apportionment. Following ratification, Congress re-imposed the income tax and was signed into law by President Woodrow Wilson. That was the Revenue Act of 1913.
The Revenue Act of 1916 enacted a graduating tax on the transfer of wealth at death to beneficiaries or the estate tax, and a graduating income tax from 2% to 15% and a tax on corporate profit.
As the government and the economy grew; so, did these taxes: that is analogous to the replacement of baby teeth with adult teeth.
The Revenue Act of 1917 included 20 tax rates and brackets from 4% to 67% and increased the corporate income tax to 6% to fund World War I. That was followed by the Revenue Act of 1918, which increased the number of income tax rates and brackets to 56 – and increased the corporate income tax to 10% over $10,000.
After the War, in 1920, Warren G. Harding was elected president: he signed into law the Revenue Act of 1921, which reduced the top income tax rate from 73% to 58%, eliminated the excess profit tax, and the capital gains tax was reduced to 12.5%. He served until his death in 1923, when Calvin Coolidge assumed the presidency and during his time in office, the top income tax rate was reduced from 58% to 25%, the inheritance tax was reduced, and the gift tax eliminated: that was the Roaring Twenties.
Herbert Hoover, another republican, was elected took office in March of 1929. Later that year, the great bull stock market crashed and that led to the great depression.
The growing inequality of income and wealth during the 1920s led Rep. Cement C. Dickerson, 69th Congress 1923-29, 1931-33, 1933-35 (D) Missouri to say, “Many of the enormous fortunes of this country far exceed any service the recipients of these swollen fortunes have ever rendered society, and the time is ripe and opportune to levy graduated income and inheritance taxes for needed revenues.
The Revenue Act of 1932, to combat the great depression, the rate on top incomes was raised from 25 percent to 63 percent. The estate tax was doubled and the tax on corporate net income was raised to 13.75 percent.
Franklin D. Roosevelt was elected and took office in 1933: He signed into law the Revenue Act of 1935, it was called the Wealth Tax. It had 33 marginal tax rates from 4% to 79% over $5 million.
In his speech to Congress June 19, 1935, he said, “Our revenue laws have operated in many ways to the unfair advantage of the few, and they have done little to prevent an unjust concentration of wealth and economic power.”
And he defended the graduating income, based on ability to pay and benefit received, as wholesome principle of taxation to raise revenues.
And he, defended and recommended an inheritance and gift tax to prevent evasion.
He also recommended a gradating income tax on corporations and that Congress maintain taxes to finance the budget for 1936.
This speech to Congress is our most important doctrine on the principles of taxation of any president.
The Revenue Act of 1936 set the tax on corporate net income from 8% to 15% percent plus a surtax on undistributed profits.
In 1941, FDR enacted the Victory Tax, which had 32 marginal tax rates: from 10% to 81% over $5 million.
From 1942 to 1945, the corporate income tax had 5 marginal tax rates: from 25% to 40%.
From 1942 to 1976, the estate tax had rates from 3% to 77% [over $10 million]: the exemption was $60, 000.
Now, I’m not going to cover the period from 1945 to 2012, because I covered that period in my You Tube tax videos:
Public Enlightenment Message #1, Parts 1 thru 7.
Public Enlightenment Message #8, Parts 1 thru 11.
Except, I want to say, there has been a drastic change in the income tax rates since, President Reagan.
He lowered top income top tax rate from 70% to 28% during his eight years in office and that was the beginning of Big US Deficits. It went from less than $1 trillion in 1980 to over $19 trillion--today:
What Republicans do, when they enter office or control the Congress; immediately, cut taxes on the wealthy.
Harding and Coolidge did it.
And, Reagan and Bush did it. They dupe voters by saying: it will expand the economy and increase revenues: Yes, they did spur economic grow, but deficits grew faster: debt to GDP rose from 33 percent in 1980 to 107 percent in 2012.
During this time: the top 1 percent had a phenomenal increase in income and wealth, while on the other side of balance sheet: Uncle Sam suffered huge deficits because of the Reagan and Bush tax cuts.
The tool, republicans used to keep taxes low on corporations and the wealthy, the Norquist no-tax-increase pledge.
That pledge is unconstitutional: you cannot serve two opposing masters at the same time: it violates the Oath of Office.
It is one big reason -- for our soaring debt.
Recently, two other bad men appeared.
Gov. Rick Perry who wants to repeal the income tax and Sen. Ted Cruz, who wants to eliminate the IRS: two republicans from Texas.
And, they are not the only ones.
Ben Carson, a republican candidate for the U.S. president, wants to replace the income tax with the principle of Tithing. He is plain crazy.
They want to take teeth out of the Tax Code and replace it with some else, like dentures, or something worst.
Proof that republicans represents the wealthy, they have repeatedly tried to pass the flat tax: H.R. 1040 and repeal the estate tax: H.R. 1105.
The record shows, they also reduced the tax on capital gains and dividends when in office or power, the two of the biggest sources of income of top 1 percent—and some have tried or proposed their elimination.
Sen. Marco Rubio is one.
Reagan and Bush gradually reduced the estate tax and Bush repealed it for 1 year in 2010. The National Debt is the amount of unpaid back taxes: man’s last chance to collect those taxes is from the estate of the decedent--before they are transferred to the next generation who did not create them.
Obama, a democratic president, revived it. As debt rises: the estate tax rates should go up and exemption down: Reagan and Bush did the opposite.
They are tax crooks.
The point I am making: there is no fairer substitute for the graduating income tax, the inheritance tax, and the corporate profit tax. They argue: these taxes are confiscatory, cost jobs, the rich are the job creators, etc.
Yes, taxes on income and profits can be excessive, some rich are job creators, but, also some invest their money in Hedge Funds, that don’t create jobs, but, make profits from price changes in stocks, commodities, indexes, etc.
And, they have gotten favorable treatment of these profits from Congress over income from wages. That is not right.
And, use their tremendous wealth, to support candidates who will pledge not to raise their taxes, those are republicans.
One reason our national debt broke $19 trillion on January 29 of 2016, is because, republicans in Congress, since Reagan, have refused to raise taxes to pay for our debts as prescribed in Article 1, Section 8 of the U.S. Constitution.
Ninety-five percent have pledged their allegiance to Norquist, instead. And the Supreme Court, which ruled the income tax unconstitutional, is OK with the anti-tax pledge, which does violate the constitution.
I demand that the Supreme Court rule on this matter: Is the outside Norquist pledge constitutional or unconstitutional? Its signers have prevented Congress from performing its constitutional duties, cut taxes during two wars, looted the Social Security Trust Fund, rigged the tax code in favor of the wealthy, cheated Uncle Sam, put us on the road to insolvency, created an American aristocracy, took control of the mass media, appointed their justices, and changed this nation into a plutocracy.
They now control the House and Senate and they want to elect a republican, who is a signer of the Norquist anti-tax pledge, as President.
Three more quotes:
GEORGE MCGOVERN, former representative, senator, and presidential nominee of the Democratic Party in 1972, said on the Charlie Rose Show, "I believe in the graduated income tax that we got under Woodrow Wilson—many years ago. I think it is the foundation stone of all these programs to strengthen the United States. It means the more you make, the higher your tax rate goes. And, that is the only fair way to do it."
This interview took place on 1/5/2012—and there have been only 24 views; but, when Donald Trump says something: it gets Big News Exposure.
ROBERT B. REICH, Chancellor's Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies, was Secretary of Labor in the Clinton administration, says, "Rather than merely oppose the flat tax, sensible people should push for a truly progressive tax -- starting with a top rate of 70 percent on that portion of anyone's income exceeding $5 million, from whatever source."
ROBERT KUTTNER, professor at Brandeis University's Heller School, said in his book: "The Rich Get Richer", 1996, "Defense of principle can be good politics -- and progressive taxation is a principle well worth defending."
What happens in the future is up to Voters.
The history of the Income, Inheritance, and Corporate Taxes
-- in a Nutshell and Quotes
Early in our history, several colonies instituted the “faculties and abilities” tax, where tax collectors went door to door to collect taxes on income: that did not work very well. It was the first attempt to tax income.
Taxes imposed by the British on the thirteen colonies led to the American Revolution in 1775-83.
The forming of the United States and the ratification of the Constitution in 1788 gave the Congress the power to lay and collect taxes.
The main sources of revenue: tariffs and excise taxes.
The Revenue Act of 1861 enacted the first income tax to fund the Civil War. It was repealed and replaced with the Revenue Act of 1862:
1. It was progressive
2. It made collection at the source
3. It included an inheritance tax
4. And, it established the Office of Commissioner of Internal Revenue— which was tax collecting department--similar to the IRS.
It did not collect enough revenues and Congress passed the Revenue Act of 1864, which increased the marginal tax rates.
After the war, Congress allowed the income tax to expire in 1872. That was part of the Revenue Act of 1870. To replace the lost revenue, it increasing tariffs and excise taxes on alcohol and tobacco.
In 1887, these taxes were part of the Socialist Labor platform:
#11. Progressive income tax and tax on inheritance, but smaller incomes to be exempt.
It was also part of the Populist Party Platform of 1892:
#3. We demand a graduated income tax.
The reason for these two movements: the industrial revolution, the age of the Robber Barons, and growing income and wealth inequality and the need for more government revenues to provide for the general welfare, pay debts, and nation building.
The income tax is like—the appearance of teeth in children--that are needed for getting sufficient nutrition, growth and health. Human teeth from incisors to molars are similar to the graduating income tax: the top set, the law, the lower set, enforcement. Both are necessary and part of natural evolution.
Rep. William Jennings Bryan supported the income tax on the floor of the House Jan. 30, 1894. He said, “If I were consulting my own preference I would rather have a graduated tax, and I believe that such a tax could be defended not only upon principle, but upon grounds of public policy as well; but I gladly accept this bill as offering a more equitable plan for making up the deficit in our revenues than any other each has been proposed.”
In 1894, a Democratic-led Congress passed the first peacetime income tax, despite opposition from republicans.
That did not last long, in 1895, the Supreme Court ruled the tax unconstitutional: citing Article I, Section 9, Clause 4, -- "No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.”
The ruling was 5-4. Was the Supreme Court right? No, Clause 4 was a rule to tax states, as a separate unit, by the federal government, based on the number of people—not land size –or some other measurement. It did not mean to block the taxation of the incomes of individuals and corporations by the federal government.
If, go back to Article 1, Section 2, Clause 3, it states this tax pertained to states which may be included in the union according to their perspective number. It was not referring to a tax on individuals or corporations.
They were a different type of tax.
William Jennings Bryan “Cross of Gold” speech July 8, 1896, said the Supreme Court ruling was wrong and defending the tax, saying, “The income tax is a just law. It simply intends to put the burdens of government justly upon the backs of the people. I am in favor of an income tax. When I find a man who is not willing to pay his share of the burden of the government which protects him, I find a man who is unworthy to enjoy the blessings of a government like ours.”
Despite the Supreme Court ruling, populists and progressives continued to fight to enact an income tax, an inheritance tax, and a corporate income tax.
In 1901, Theodore Roosevelt became president after the assassination of William McKinley and was re-elected in 1904, and in a speech on April 14, 1906, he endorsed a progressive estate tax, saying, “Such taxation should, of course, be aimed merely at the inheritance or transmission in their entirety of those fortunes swollen beyond all healthy limits.”
And, in his message to Congress on Dec. 7, 1907, he said, “In my judgment both of these taxes [the income and inheritance] should be part of our system of Federal taxation.” And, he said, he hoped that a graduating income tax could be devised which the Supreme Court will not declare constitutional.
William Howard Taft was elected in 1909, and said in his inaugural address, “I recommend a graduating inheritance tax is a correct principle and as certain and easy collection.”
In 1909, Congress enacted an excise tax on corporations based on income. It was considered the “privilege of doing business” and became part of the tax code.
In 1910, Theodore Roosevelt said in his New Nationalism Speech: "I believe in a graduated income tax on big fortunes, and...a graduated inheritance tax on big fortunes, properly safeguarded against evasion, and increasingly rapidly in amount with the size of estates."
Democrats and progressives continued to work for the enactment of these taxes and republicans fought to defeat them.
The ratification of the Sixteenth Amendment in 1913, after a hard battle against republicans with ties to wealthy industrialists, gave congress the power to levy tax on income from whatever source derived without apportionment. Following ratification, Congress re-imposed the income tax and was signed into law by President Woodrow Wilson. That was the Revenue Act of 1913.
The Revenue Act of 1916 enacted a graduating tax on the transfer of wealth at death to beneficiaries or the estate tax, and a graduating income tax from 2% to 15% and a tax on corporate profit.
As the government and the economy grew; so, did these taxes: that is analogous to the replacement of baby teeth with adult teeth.
The Revenue Act of 1917 included 20 tax rates and brackets from 4% to 67% and increased the corporate income tax to 6% to fund World War I. That was followed by the Revenue Act of 1918, which increased the number of income tax rates and brackets to 56 – and increased the corporate income tax to 10% over $10,000.
After the War, in 1920, Warren G. Harding was elected president: he signed into law the Revenue Act of 1921, which reduced the top income tax rate from 73% to 58%, eliminated the excess profit tax, and the capital gains tax was reduced to 12.5%. He served until his death in 1923, when Calvin Coolidge assumed the presidency and during his time in office, the top income tax rate was reduced from 58% to 25%, the inheritance tax was reduced, and the gift tax eliminated: that was the Roaring Twenties.
Herbert Hoover, another republican, was elected took office in March of 1929. Later that year, the great bull stock market crashed and that led to the great depression.
The growing inequality of income and wealth during the 1920s led Rep. Cement C. Dickerson, 69th Congress 1923-29, 1931-33, 1933-35 (D) Missouri to say, “Many of the enormous fortunes of this country far exceed any service the recipients of these swollen fortunes have ever rendered society, and the time is ripe and opportune to levy graduated income and inheritance taxes for needed revenues.
The Revenue Act of 1932, to combat the great depression, the rate on top incomes was raised from 25 percent to 63 percent. The estate tax was doubled and the tax on corporate net income was raised to 13.75 percent.
Franklin D. Roosevelt was elected and took office in 1933: He signed into law the Revenue Act of 1935, it was called the Wealth Tax. It had 33 marginal tax rates from 4% to 79% over $5 million.
In his speech to Congress June 19, 1935, he said, “Our revenue laws have operated in many ways to the unfair advantage of the few, and they have done little to prevent an unjust concentration of wealth and economic power.”
And he defended the graduating income, based on ability to pay and benefit received, as wholesome principle of taxation to raise revenues.
And he, defended and recommended an inheritance and gift tax to prevent evasion.
He also recommended a gradating income tax on corporations and that Congress maintain taxes to finance the budget for 1936.
This speech to Congress is our most important doctrine on the principles of taxation of any president.
The Revenue Act of 1936 set the tax on corporate net income from 8% to 15% percent plus a surtax on undistributed profits.
In 1941, FDR enacted the Victory Tax, which had 32 marginal tax rates: from 10% to 81% over $5 million.
From 1942 to 1945, the corporate income tax had 5 marginal tax rates: from 25% to 40%.
From 1942 to 1976, the estate tax had rates from 3% to 77% [over $10 million]: the exemption was $60, 000.
Now, I’m not going to cover the period from 1945 to 2012, because I covered that period in my You Tube tax videos:
Public Enlightenment Message #1, Parts 1 thru 7.
Public Enlightenment Message #8, Parts 1 thru 11.
Except, I want to say, there has been a drastic change in the income tax rates since, President Reagan.
He lowered top income top tax rate from 70% to 28% during his eight years in office and that was the beginning of Big US Deficits. It went from less than $1 trillion in 1980 to over $19 trillion--today:
What Republicans do, when they enter office or control the Congress; immediately, cut taxes on the wealthy.
Harding and Coolidge did it.
And, Reagan and Bush did it. They dupe voters by saying: it will expand the economy and increase revenues: Yes, they did spur economic grow, but deficits grew faster: debt to GDP rose from 33 percent in 1980 to 107 percent in 2012.
During this time: the top 1 percent had a phenomenal increase in income and wealth, while on the other side of balance sheet: Uncle Sam suffered huge deficits because of the Reagan and Bush tax cuts.
The tool, republicans used to keep taxes low on corporations and the wealthy, the Norquist no-tax-increase pledge.
That pledge is unconstitutional: you cannot serve two opposing masters at the same time: it violates the Oath of Office.
It is one big reason -- for our soaring debt.
Recently, two other bad men appeared.
Gov. Rick Perry who wants to repeal the income tax and Sen. Ted Cruz, who wants to eliminate the IRS: two republicans from Texas.
And, they are not the only ones.
Ben Carson, a republican candidate for the U.S. president, wants to replace the income tax with the principle of Tithing. He is plain crazy.
They want to take teeth out of the Tax Code and replace it with some else, like dentures, or something worst.
Proof that republicans represents the wealthy, they have repeatedly tried to pass the flat tax: H.R. 1040 and repeal the estate tax: H.R. 1105.
The record shows, they also reduced the tax on capital gains and dividends when in office or power, the two of the biggest sources of income of top 1 percent—and some have tried or proposed their elimination.
Sen. Marco Rubio is one.
Reagan and Bush gradually reduced the estate tax and Bush repealed it for 1 year in 2010. The National Debt is the amount of unpaid back taxes: man’s last chance to collect those taxes is from the estate of the decedent--before they are transferred to the next generation who did not create them.
Obama, a democratic president, revived it. As debt rises: the estate tax rates should go up and exemption down: Reagan and Bush did the opposite.
They are tax crooks.
The point I am making: there is no fairer substitute for the graduating income tax, the inheritance tax, and the corporate profit tax. They argue: these taxes are confiscatory, cost jobs, the rich are the job creators, etc.
Yes, taxes on income and profits can be excessive, some rich are job creators, but, also some invest their money in Hedge Funds, that don’t create jobs, but, make profits from price changes in stocks, commodities, indexes, etc.
And, they have gotten favorable treatment of these profits from Congress over income from wages. That is not right.
And, use their tremendous wealth, to support candidates who will pledge not to raise their taxes, those are republicans.
One reason our national debt broke $19 trillion on January 29 of 2016, is because, republicans in Congress, since Reagan, have refused to raise taxes to pay for our debts as prescribed in Article 1, Section 8 of the U.S. Constitution.
Ninety-five percent have pledged their allegiance to Norquist, instead. And the Supreme Court, which ruled the income tax unconstitutional, is OK with the anti-tax pledge, which does violate the constitution.
I demand that the Supreme Court rule on this matter: Is the outside Norquist pledge constitutional or unconstitutional? Its signers have prevented Congress from performing its constitutional duties, cut taxes during two wars, looted the Social Security Trust Fund, rigged the tax code in favor of the wealthy, cheated Uncle Sam, put us on the road to insolvency, created an American aristocracy, took control of the mass media, appointed their justices, and changed this nation into a plutocracy.
They now control the House and Senate and they want to elect a republican, who is a signer of the Norquist anti-tax pledge, as President.
Three more quotes:
GEORGE MCGOVERN, former representative, senator, and presidential nominee of the Democratic Party in 1972, said on the Charlie Rose Show, "I believe in the graduated income tax that we got under Woodrow Wilson—many years ago. I think it is the foundation stone of all these programs to strengthen the United States. It means the more you make, the higher your tax rate goes. And, that is the only fair way to do it."
This interview took place on 1/5/2012—and there have been only 24 views; but, when Donald Trump says something: it gets Big News Exposure.
ROBERT B. REICH, Chancellor's Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies, was Secretary of Labor in the Clinton administration, says, "Rather than merely oppose the flat tax, sensible people should push for a truly progressive tax -- starting with a top rate of 70 percent on that portion of anyone's income exceeding $5 million, from whatever source."
ROBERT KUTTNER, professor at Brandeis University's Heller School, said in his book: "The Rich Get Richer", 1996, "Defense of principle can be good politics -- and progressive taxation is a principle well worth defending."
What happens in the future is up to Voters.