Good Morning...Got Income Tax? Thank a Confederate.

[Okla-homey]

Aug. 5, 1861: Lincoln signs first federal income tax into law

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146 years ago on this day in 1861, President Abe Lincoln imposes the first federal income tax by signing the Revenue Act of 1861. Strapped for cash with which to prosecute the Civil War, Lincoln and Congress agreed to impose a 3 percent tax on annual incomes over $800.

As early as March 1861, Lincoln had begun to take stock of the federal government’s financial means to force the erring South back into the federal fold. He sent letters to cabinet members Edward Bates, Gideon Welles and Salmon Chase requesting their opinions as to whether or not the president had the constitutional authority to "collect [such] duties."

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The US in 1861. Torn asunder by a civil war in which several southern states attempted to illegally dissolve their union with the rest of the country in order to ensure the continued existence of human chattel slavery. They failed.

According to documents housed and interpreted by the Library of Congress, Lincoln was particularly concerned about maintaining federal authority over collecting revenue from ports along the southeastern seaboard, which he worried, might fall under the control of the Confederacy.

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One of the ways the government fought tax cheaters was by the use of the US Revenue Service (now the US Coast Guard) to board and inspect ships believed to be carrying cargos subject to import taxes trying to slip in to US ports.

The Revenue Act’s language was broadly written to define income as gain "derived from any kind of property, or from any professional trade, employment, or vocation carried on in the United States or elsewhere or from any source whatever." The act imposed taxes on individual and corporate income.

According to the U.S. Treasury Department, the comparable minimum taxable income in 2003, after adjustments for inflation, would have been approximately $16,000 if we were still living under the 1861 Act.

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Folks had problems with the notion of a tax on individual income from the earliest days. This 1860's cartoon juxtaposes the heavy tax burden weighing on the industrious with the shiftless lazy bum who paid no income taxes.

With the Civil War won, Congress repealed Lincoln’s tax law ten years after its passage in 1871. However, April 15 became a big day in American life when in 1909, Congress passed the 16th Amendment which set in place the federal income-tax system used today. The states ratified the XVI Amendment in 1913, just in time to finance the First World War effort .

Thus, whether an income tax was constitutional before 1913 was made moot by the ratification of the XVI Amendment. The text of the amendment:


The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

Perhaps interestingly, there have been numerous court challenges by federal taxpayers over the years. One that has surfaced several times is based on the notion that pacifist folks shouldn't be required to pay taxes to finance our national defense. That one is always the source if much judicial mirth and general chuckles when it comes up.

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Of course, the states have gotten into the act as well. Map of USA showing states with no state income tax in red, and states that tax only interest and dividend income in gray.

The bottomline is simple, the next time you lament payment of your income taxes, thank these guys.

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But for their actions, no tax on income would have been necessary or politically feasible in 1861. The success of that temporary Civil War era income tax is what made it politically feasible and desireable to do it permanently in 1909. Perhaps if they had known the ramifications of their actions, the Slavocrats of the plantation set would have picked their own damned cotton -- or at least hired illegal messicans for cheap like lettuce planters do today. sheesh.

[jk the sooner fan]

this cant end well......

[SoonerStormchaser]

Gawdamn suthners fuggin it up fer us all! Oh wait, I was born in South Carolina...

Gawdamn me then!

[85Sooner]

F everyone who voted for it , I hope they rot you know where along with every descendent there of! So There

[yermom]

if by "thank a Confederate" you mean "thank Lincoln" i agree ;)

[SoonerStormchaser]

I was expecting SicEm to have commented by now...WHERE THE HELL ARE YOU?

[reevie]

So, if Lincoln chose not to march this country into a costly war then no income tax in 1861.

[SicEmBaylor]

So, if Lincoln chose not to march this country into a costly and illegal war then no income tax in 1861.

Fixed.

[Frozen Sooner]

So, if a bunch of slave-owning wannabe aristocrats hadn't been trying to preserve their quasi-feudal way of life which was epitomized by the "right" to own other human beings by rebelling against the duly-elected government of these United States, we wouldn't have to pay income tax?

This time it's fixed.

[Okla-homey]

So, if Lincoln chose not to march this country into a costly war then no income tax in 1861.

Absolutely. Instead, Lincoln should have let about half the United States get away with shooting up Fort Sumter, declaring "peace out" and wandering off to do it's own thing while taking billions of dollars worth of Federal real and personal property with it. You know, "No Blood for Dirt.";)

[OklahomaTuba]

Taxing Income is flat stupid.

Why we cannot just tax consumption is beyond me.

[olevetonahill]

Absolutely. Instead, Lincoln should have let about half the United States get away with shooting up Fort Sumter, declaring "peace out" and wandering off to do it's own thing while taking billions of dollars worth of Federal real and personal property with it. You know, "No Blood for Dirt.";)
So You finally saw the Lite Huh ? :P

[Frozen Sooner]

Taxing Income is flat stupid.

Why we cannot just tax consumption is beyond me.

1. Consumption taxes are by nature regressive, as the poor spend a far greater percentage of their income than do the rich.

2. Consumption taxes tend to slow the economy down by discouraging, well, consumption. While there is a corresponding drop in interest rates, the easy credit means nothing if there's nobody buying anything.

[olevetonahill]

Im gonna take the Bankin dudes opinion here ;)

[Frozen Sooner]

Well, I'm not trying to say that an income tax is the best thing ever, nor even better necessarily than a consumption or value-added tax. I'm just giving the arguments against it.

[olevetonahill]

Well, I'm not trying to say that an income tax is the best thing ever, nor even better necessarily than a consumption or value-added tax. I'm just giving the arguments against it.
So Now you are a Dem an gonna waffle ?
Sheesh I aint smart atall
:P

[85Sooner]

1. Consumption taxes are by nature regressive, as the poor spend a far greater percentage of their income than do the rich.

2. Consumption taxes tend to slow the economy down by discouraging, well, consumption. While there is a corresponding drop in interest rates, the easy credit means nothing if there's nobody buying anything.


Not if the income tax is removed from the corporate market place. Prices would remain stable.

[yermom]

1. Consumption taxes are by nature regressive, as the poor spend a far greater percentage of their income than do the rich.

2. Consumption taxes tend to slow the economy down by discouraging, well, consumption. While there is a corresponding drop in interest rates, the easy credit means nothing if there's nobody buying anything.

people aren't going to stop buying things... maybe they should though ;)

[Frozen Sooner]

Not if the income tax is removed from the corporate market place. Prices would remain stable.

Doesn't matter if prices remain stable. You're increasing the opportunity cost of items even if the actual dollar cost remains the same. That prices would remain stable is an unproven assertion in any case.

[Hamhock]

the Fair Tax bool has a fascinating chapter on the history of the income tax.

I'll say again that the smartest thing congress ever did was implement the withholding system. because of withholding the average 'merican has no idea how much tax he actually pays.

and every consumption tax propsal I have seen addresses regressiveness by exempting life's basic needs.

[Frozen Sooner]

Yep, that's one way around that, for sure.

Who decides what's a basic need?

[Hamhock]

Yep, that's one way around that, for sure.

Who decides what's a basic need?


food, clothing, shelter

it ain't rocket science. I realiize "basic" is in the eye of the beholder, but I firmly believe any difficulty in setting minimum standard of living is far outweighed by the benefirs of eliminating the current income tax system

[Hamhock]

Doesn't matter if prices remain stable. You're increasing the opportunity cost of items even if the actual dollar cost remains the same.
I don't understand this statement. please explain.

[Frozen Sooner]

Cool. So a person spending $2 million on his house gets an exemption on it?

Or do you set an exemption cap? Is it uniform around the country, or do you customize it to each zip code or township? I can buy a place in OKC for one heck of a lot less than I can San Francisco.

How much is too much to spend on a gallon of milk before you're buying luxury milk?

How much is too much to spend on a shirt?

Realize that one of the major advantages of a national sales/consumption tax is the lack of bureaucracy-and then realize that you're going to have to set up a bureaucracy to administer maximum prices of necessities.

[Frozen Sooner]

I don't understand this statement. please explain.

Sure. Say the "consumption tax" is set at 10%.

Now assume that the elimination of the income tax makes up for the increase in the price paid by the consumer due to the consumption tax. So a can of soda that would have cost a dollar under the old system now costs...


hang on I'll get back to this. In the middle of something.

[soonerboomer93]

I know how much I pay, and I dread having to pay my taxes next year

[jk the sooner fan]

i wonder if luxury milk would have be any different with my lactose intolerance

[Frozen Sooner]

OK, back...

The point I was trying to make rather long-windedly about the increased opportunity cost of a purchase is that the tax-free advantages of investing would increase the opportunity cost of a purchase vice investment.

[soonerboomer93]

thanks sic'em

[soonerboomer93]

oh, since I earned all my money (except some interest) outside of the US i'm all for having a purchase based tax instead of income :D

[Hamhock]

OK, back...

The point I was trying to make rather long-windedly about the increased opportunity cost of a purchase is that the tax-free advantages of investing would increase the opportunity cost of a purchase vice investment.


so you think the consumption tax would increase the average American's appetite toward investment?

not sure I agree. The average American already vastly under utilizes their opportunity to invest tax free. But even if you are correct, that sounds like a good thing to me.

[mdklatt]

Not if the income tax is removed from the corporate market place. Prices would remain stable.

An income tax does not create an incentive to earn less (despite what Republicans would have you believe), but higher consumption taxes create an incentive to spend less. Why do you think people go all ape-**** on "tax-free" shopping weekends when they're saving less than they would have during a normal back-to-school sale?

[FaninAma]

I actually don't think Lincoln or the Confederacy is responsible for IRS. The creation of the Federal Reserve made it necessary that somebody pick up the tab for the continual devaluation of the US's currency as the Fed used it's magical money making presses to print this country's way to prosperity and become the dominant economy in the world. Somebody had to be there to co-sign for the Federal government's reckless spending and that poor sap was the US taxpayer.

Now if you want to assign blame to the policies that set the precedent that allowed the Federal government to take over complete control of the US economy then you might find a culprit from the Civil War. No need for me to go into specifics.

The Federal Reserve is like magic. All you have to do to insure prosperity is turn the crank of the printing presses and wham!.....even peopel with poor credit can afford $500,000 houses. Who cares if it's later generations of taxpayers who have to clean up the mess left by the inflationary policies of the Federal Reserve and the greedy banking/investing sectors.

[85Sooner]

the Fair Tax bool has a fascinating chapter on the history of the income tax.

I'll say again that the smartest thing congress ever did was implement the withholding system. because of withholding the average 'merican has no idea how much tax he actually pays.

and every consumption tax propsal I have seen addresses regressiveness by exempting life's basic needs.


What ham said. Not to mention all the money that WILL NOT be taken out of your check every two weeks.

[mdklatt]

What ham said. Not to mention all the money that WILL NOT be taken out of your check every two weeks.

How can we have more take-home pay, no price increases, and no change in government revenue? It doesn't add up.

[Hamhock]

An income tax does not create an incentive to earn less (despite what Republicans would have you believe),

i beg to differ.


I have personally set in a meeting, with about a dozen physicians evaluating a set of investments. One was an imaging center that would have created about 10 jobs.

Another was a passive investment that would be held and sold at capital gain rates.

They actually said "after 47% taxes, it's not worth the hassle".

the spending spree is not a good analogy. If i can buy a widget today for $100 (sales tax free day), or buy the widget tomorrow for $108, of course i'm going to buy all the widgets I need today.

If people arent' going to spend the money because of the consumption tax, what are they going to do with it? (keep in mind the theory put forth in the fair tax book is that the price of goods will actually stay the same, after inclusion of the consumption tax)

[Vaevictis]

I have personally set in a meeting, with about a dozen physicians evaluating a set of investments. One was an imaging center that would have created about 10 jobs.

Another was a passive investment that would be held and sold at capital gain rates.

They actually said "after 47% taxes, it's not worth the hassle".

Sounds a lot to me like:

1. They weren't incentivized to earn less, just to earn more using a different vehicle.
2. It wasn't income tax that was causing the problem, it was the varying rate of taxation between two types of income.

[Hamhock]

Sounds a lot to me like:

1. They weren't incentivized to earn less, just to earn more using a different vehicle.
2. It wasn't income tax that was causing the problem, it was the varying rate of taxation between two types of income.

bottom line is that they would have started the center had there not been a 40% penalty for every dollar they earned.

[mdklatt]

They actually said "after 47% taxes, it's not worth the hassle".


53% of something is always higher than 100% of nothing, so that seems pretty stupid to me.




the spending spree is not a good analogy. If i can buy a widget today for $100 (sales tax free day), or buy the widget tomorrow for $108, of course i'm going to buy all the widgets I need today.


1) The emotional impact of calling it "tax free" outweighs the actual savings. Nobody would get excited about a "8% OFF SALE!" when there are typically much better back-to-schools sales. But call it a tax-free weekend and people lose their damn minds. Nobody would drive from Oklahoma to Dallas to save 10% on back-to-school stuff, but before Oklahoma started the tax-free weekend, droves of people were doing it to save even less.

2) Tax free weekends benefit nobody but retailers. They sell more stuff without having to lower prices. All the money that consumers are "saving" is coming out of their local government, which is going to have to make up the deficit somehow.




(keep in mind the theory put forth in the fair tax book is that the price of goods will actually stay the same, after inclusion of the consumption tax)

This theory doesn't hold water unless government revenue goes down. If you're paying $10,000 to the government now, you're somehow going to have to be paying $10,000 to the government under the fair tax, unless you're just shifting the burden around.

[Vaevictis]

bottom line is that they would have started the center had there not been a 40% penalty for every dollar they earned.

Understood.

Fact is, the income tax policy is designed to encourage people to earn money by investing in a way that results in capital gains instead of resulting in normal income. It looks like it did exactly what it was supposed to do.

The point I'm making is that it wasn't so much income tax in general that influenced the result there, but an income tax policy that prefers one type of income over another. And it didn't incentivize to earn less, just earn more using different means.

[Vaevictis]

This theory doesn't hold water unless government revenue goes down.

Well, considering the people who tend to advocate it, I'm betting that's exactly the point.

[85Sooner]

An income tax does not create an incentive to earn less (despite what Republicans would have you believe), but higher consumption taxes create an incentive to spend less. Why do you think people go all ape-**** on "tax-free" shopping weekends when they're saving less than they would have during a normal back-to-school sale?


Because they are ignorant. While an income tax does not create an incentive to earn less however more and more is taken from the "worker" to be redistributed by the government. This is a recipe for future disaster. The elimination of the withholding will increase the Normal workers check by about 25% . The price of products will remain stable due to 2 forces. The free market and the elimination of embedded taxation. Those below certain income levels would receive rebates of the paid consumption tax to compensate for being losers.

[85Sooner]

P.S. , the sales tax holiday is a State tax, not a federal tax.

[Tear Down This Wall]

So, the long and short of it is this: People who continue to fly the Confederate Flag today love income taxes.

[Okla-homey]

So, the long and short of it is this: People who continue to fly the Confederate Flag today love income taxes.

That sums it up nicely. That, and they "bother" their sisters a lot and hate black people.;)