Friday, August 5, 2011

August 5, 1861

The Revenue Act of 1861 is enacted, levying the first income tax in the United States.

Rates under the Act were 3% on income above $800 (adjusted for inflation: $18,875 in as of 2009 dollars [2]) and 5% on income of individuals living outside the country.

The Revenue Act of 1861 was signed into law by Abraham Lincoln, the first Republican President. This Act introduced Federal income tax as a flat rate tax.

The income tax provision (Sections 49, 50 and 51) was repealed by the Revenue Act of 1862. (See Sec.89, which replaced the flat rate with a progressive scale of 3% on annual incomes beyond $600 ($12,742 in 2009 dollars) and 5% on incomes above $10,000 ($212,369 in 2009 dollars) or those living outside the U.S., and perhaps more significantly it was explicitly temporary, specifying termination of income tax in "the year eighteen hundred and sixty-six").

This tax was later completely repealed, but re-enacted during World War I. The burden on taxpayers has been increasing almost continuously ever since.

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