History of Taxation in the United States – Free Essay Examples

History of Taxation in the United States

The history of the United States of America on taxation began immediately after the country gained independence from the British government. A federal tax system that is similar to that of England was developed. The tariffs become the principal revenue-raising authority soon after the independence. In 1789, the constitution of the U.S. authorized congress to charge taxes, and congress did not hesitate but imposed duties on imported duties almost immediately. These duties were known as custom and excise duties. They became the first means by which the U.S. government composed income. This paper aims at elaborating the individual taxation history of the United States. The focus is on the changes that have been done and the effectiveness of the changes (Pratt and Kulsrud 3).

As time went by, the political leaders realized that there was a requirement for another system of revenue generation to supplement the previous system of tariffs. This was a result of the expansion of the activities of the federal government. In the year 1861, congress enacted the federal income tax which was supposed to aid in the generation of finance that could be used in the civil war. The expenditures increased due to the civil war, it is reported that the income tax succeeded in its mandate of financing the war. In 1872, the income tax was removed due to what was termed as the completion of its task. There were no additional revenues necessary, the burden of financing the government solely rested on the tariffs and the duties system (Pratt and Kulsrud 3).

However, the tariffs had several oppositions who believed that they protected the interests of a few in the government. The capitalists are said to be protected by this system of tariffs. It was claimed that they achieved this goal by protecting the capitalists’ products from the competition. Another claim released reported that tariffs increased the prices of goods. This imposed a greater burden on the middle-class people and the poor, the rich were not affected. This called for the need to restore income tax. Between the years 1872 and 1894, congress introduced so many bills about sixty in an attempt to reenact the income tax. The results were seen in 1894. Nevertheless, the enactment did not last long enough for it was abolished in 1895 (Pratt and Kulsrud 3).

In 1909, income tax was enacted by congress on corporations, which had some grounds of the constitution. With the successful enactment of income tax on corporations, it became easier for congress to propose an amendment that will result in levying taxes on all. The amendment became successful in the year 1913. It laid powers on Congress to levy and collect income taxes from each source in every state without restrictions.

This was put in place by congress without any delay and was popularly known as the sixteenth amendment. This is the federal income tax that has been operational since 1913 in the United States. However, there have been changes and several adjustments to it over time. It was made an income tax law, which was widely accepted and has been in use in collecting and levying taxes on individuals and organizations (Pratt and Kulsrud 3).

Later, Congress passed so many pieces of legislation in the income tax law, this was due to the increased need for additional revenue for the federal government. The history was changing and more funds were required by the government. Consequently, the passage of separate pieces of legislation made the income tax law to be complex than ever. Even those who were working for its enactment found it difficult to apply since the whole process was involving and tedious. It required searching for even 100 sources before one can determine which law was applicable or was currently in effect. The confusion was inevitable and avoidable.

This compelled Congress to resolve the confusion by the use of another criterion that had not been used. They made an internal revenue code with the systematic arrangement of all its laws that required no reenactment in 1939. This gave a permanent solution to the problem of taxation. However, the code experienced some revisions in 1954 and 1986. Therefore, it is currently referred to as an internal revenue code of 1986. The law has been amended several times as need arouse in the taxation sector and will accommodate more of those in the foreseeable future. The income tax is a taxation levy on individual businesses, entrepreneurs, and governmental works. The several changes and enactments resulted in several adjustments on the levies imposed on individuals (Pratt and Kulsrud 4).

In the year 1916, Congress also enacted a law that would lead to taxation on individual property transfers. The value of the tax was dependent on the value of the assets that were being transferred. This was called the estate tax. The work of this federal estate tax was to ensure that any transaction carried out by any person for their property was taxed. However, it was realized that people could avoid paying taxes by giving away the properties. Therefore, there was a need to amend the law so that it imposes charges on the properties that are given as a gift or wealth transfer. This includes the property or wealth that is transferred or inherited upon the death of the owner (Pratt and Kulsrud 3).

The federal tax is the main income generation source for the government in the United States of America. These are levies on various charges imposed on individuals to support and sustain the economic stability of the government of the United States. Other taxes are less significant in funding the government. This is because they generate fewer funds, unlike the federal taxes. Most Americans view the taxes imposed on them as a little overstretching. Many people have more than one job to keep up with the pressure of federal taxes (Pratt and Kulsrud 3).

Income is considered as an increase in wealth possession of a person, which is permanent. These permanent increments are all taxable according to the law of taxation. Those that are not taxable are the temporary income generation such as loans. The exclusions such as medical expenses and house mortgages are not taxed by the federal government. These exclusions are extra or unexpected expenses. However, it entirely depends on congress to decide whether to impose a tax on some income-generating activity or not. These exclusions are made by Congress for political, economic, or individual interests. They influence the government into acting in favor of the common middle class and the poor people in the society (Pratt and Kulsrud 6).

There are various taxes that a government can impose on individuals. One of them is employment tax. This is imposed on a self-employed, individual or employers. It is a levy on all the wages earned and the proceeds are used to fund the unemployment program. Another type is the FICA tax. This is aimed at helping individuals when they need help such as sickness, old age, death, or any disability. It is generally referred to as the social security and Medicare taxes. These are among many other taxes that the government uses to fund itself (Pratt and Kulsrud 18).

The federal estate tax is levied on all property of a person who has died before another person inherits it. These properties are valued on the day the person died. The taxable estate is obtained by deducting all the funeral expenses, the person’s debts, state death taxes, and any other charitable gift made, this closely relates with the state and local transfer taxes. This is the imposed inheritance tax for a person who possesses the right to receive all the possessions of the deceased. This kind of tax is regulated depending on the type of relationship that one had with the deceased. The close the relationship the less the tax and vice versa is also true (Pratt and Kulsrud 16).

FUTA taxes are another form of tax for those employers who are said to pay wages to their employees of about $ 1,500 for any quarter calendar of the year, or it can be used on those employers who use, 20 employees per day during any calendar of the year (Pratt and Kulsrud 23).

In conclusion, the American history of taxation has evolved over the years with several enactments put in place. The individual taxations are numerous, which are considered as a little overstretching to the majority of the people.

Works Cited

Pratt, James W., and William N. Kulsrud. Individual Taxation. Belmont, CA: Cengage learning, 2011. Print.

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1. UniPapers. "History of Taxation in the United States." May 3, 2022. https://unipapers.org/free-essay-examples/history-of-taxation-in-the-united-states/.


UniPapers. "History of Taxation in the United States." May 3, 2022. https://unipapers.org/free-essay-examples/history-of-taxation-in-the-united-states/.


UniPapers. 2022. "History of Taxation in the United States." May 3, 2022. https://unipapers.org/free-essay-examples/history-of-taxation-in-the-united-states/.


UniPapers. (2022, May 3). History of Taxation in the United States. https://unipapers.org/free-essay-examples/history-of-taxation-in-the-united-states/


UniPapers. (2022) 'History of Taxation in the United States'. 3 May.