Thursday, August 30, 2012

SUMMER RERUN - THE FIRST 1040


I talked about my first 1040.  Now here is a post on the first 1040 –

In February of 1913 the 16th Amendment was ratified by the required three-fourths of the states. The amendment gave Congress the power to “lay and collect tax on incomes, from whatever sources derived, without apportionment among the several states, and without regard to any census or enumeration.” On October 3, 1913, Congress passed the Revenue Act of 1913, which created the first permanent federal income tax.

Congress had made two previous attempts at instituting a federal income tax. The first, in 1861, was an emergency measure to fund the Civil War and was repealed in 1872. In 1894, in response to complaints that excessive reliance on tariffs as a source of revenue caused the price of imported goods to rise, Congress again passed an income tax law, which the Supreme Court ruled unconstitutional in 1895.

Here are some facts about the very first Form 1040:

· The tax applied to salaries and wages, interest, dividends, rents, royalties, pensions and annuities, income from estates, trusts, sole proprietorships and partnerships, and gains from the sale of most types of property.

· The salaries and wages of state and local government employees were exempt from income tax.

· Interest from federal, as well as state and local, government bonds were exempt from income tax.

· Deductions were allowed for “personal” interest, federal excise taxes, taxes paid to state and local governments, casualty and theft losses, bad debts, business expenses, and depreciation of property used in business.

· There was an exemption of $3,000.00 for single persons and $4,000.00 for married couples.

· A “normal” tax of 1% was applied to the first $20,000.00 of taxable income. Dividends were exempt from this “normal” tax. An additional or “super” tax of from 1% to 6% was applied to income, including dividends, in excess of $20,000.00.

· The return was due “on or before the first day of March”.

· There was only one page of instructions!

Over the years the federal income tax has evolved into the complicated “mess” that it is today. According to former Treasury Secretary Paul O’Neill, “Our tax code is so complicated; we’ve made it nearly impossible for even the Internal Revenue Service to understand.”  
TTFN

No comments: