Rebuilding the United States
Rebuilding the United States
Federal Sales Tax Instead of Income Tax
In order to fix something it's important to understand it. So let's review the history of the U.S. Federal Income Tax System.
Article I, Section 8, Clause 1 of the United States Constitution (the " Taxing and Spending Clause "), specifies Congress's power to impose "Taxes, Duties, Imposts and Excises", but Article I, Section 8 requires that, "Duties, Imposts and Excises shall be uniform throughout the United States."
In order to help pay for its war effort in the American Civil War , Congress imposed its first personal income tax in 1861. It was part of the Revenue Act of 1861 (3% of all incomes over US $800). This would have resulted in the exemption of many citizens due to lower average income.
However, by 1862, the United States government realized that the war would not end quickly and that the revenue generated by this income tax couldn't be sufficient. As a result, before any income tax was collected under the first system, the Revenue Act of 1862 was passed in July of 1862. The act was signed into law by President Lincoln on July 1, 1862.
The Revenue Act of 1862 contained three main provisions, with the primary goal of increased revenue. The three provisions were:
1. The creation of the office of the Commissioner of Internal Revenue, a department whose duty was to ensure the collection of taxes,
2. The levying of excise taxes on many every day goods and services, and
3. An adjustment to the income tax that was created under the Revenue Act of 1861.
The Revenue Act of 1862, section 92, states that: " duties on incomes herein imposed shall be due and payable" in 1863 and each year thereafter until and including 1866 "and no longer."
In 1894, Democrats in Congress passed the Wilson-Gorman tariff , which imposed the first peacetime income tax. The rate was 2% on income over $4000, which meant fewer than 10% of households would pay this tax. The purpose of the income tax was to make up for revenue that would be lost by tariff reductions.
In 1895, the United States Supreme Court , in its ruling in Pollock v. Farmers' Loan & Trust Co . , found a tax based on receipts from the use of property to be unconstitutional. Due to the political difficulties of taxing individual wages without taxing income from property, a federal income tax was impractical from the time of the Pollock decision until the time of the ratification of the Sixteenth Amendment.
Congress proposed the Sixteenth Amendment (ratified by the requisite number of states in 1913), which states:
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 .
Therefore, in 1913, the 16th Amendment to the Constitution made the income tax a permanent fixture in the U.S. tax system. The amendment gave Congress legal authority to tax income and resulted in a revenue law that taxed incomes of both individuals and corporations.
In fiscal year 1918, annual internal revenue collections passed the billion dollar mark, rising to $5.4 billion by 1920. With the advent of World War II, employment increased, as did tax collections, to $7.3 billion. The withholding tax on wages was introduced in 1943 and was instrumental in