The income tax is, at its core, a method of population control and redistribution of wealth. It's also a disincentive to work because the more you work, the more you pay.
For years, this writer has advocated for its abolishment in favor of a wealth tax. Still, the wealth tax does not fix any of the problems cited above. The complete abolishment of the income tax does this and Trump is hinting that he'd like to see that happen.
Here is the backstory of the personal income tax in the U.S.
In 1861, the first federal income tax was part of the Revenue Act to help fund the Civil War. This tax levied a flat rate of 3 percent on incomes over $800. The next year, a revised income tax imposed a 3-percent tax on incomes between $600 and $10,000 and 5-percent tax on incomes exceeding $10,000. This measure also established the position of Commissioner of Internal Revenue. However, it was repealed in 1872 due to public opposition and a reliance on other revenue sources like alcohol taxes and tariffs.
In 1894, the tax scheme was revisited, out of nowhere. Dubbed “The Wilson Tariff Act,” it reintroduced an income tax, but it was short-lived. The Supreme Court ruled in 1895 that this tax was unconstitutional. That led to its repeal and to the disbandment of the income tax division within the Bureau of Internal Revenue.
So in 1909, President Taft pushed a constitutional amendment to allow federal income taxation without apportionment among states based on population. This proposal gained traction somehow amid growing support for progressive taxation. Socialism was creeping into government and the American ethos. In 1913, the 16th Amendment was ratified, granting Congress the power to impose an income tax. This was a significant turning point, allowing a graduated Federal income tax system.
Following the ratification of the 16th Amendment, Congress established a federal income tax with rates starting at 1 percent on net personal incomes over $3,000, along with a 6-percent surtax on incomes over $500,000. The first Form 1040 was introduced that year.
Then came the gouging. The Revenue Act of 1918 increased tax rates to fund World War I, creating a progressive structure with rates as high as 77 percent for incomes over $1 million. Why Americans were spending this sort of money to fund a war in Europe was never questioned as this was the beginning of the era of PR. Social manipulation programs were turned on the American citizenry, suckering the whole country into wanting to fight the “monsters” in Europe.
The direct and indirect results of this stupidity led to the rise of both Marxist Communism and Fascism, the Soviet Union, the Cold War, the nuclear bomb, and the mess we are in today. Good work, propagandists.
Throughout the 20th century, the income tax system continued to evolve, particularly during wartime, when rates were increased to an extreme. For example, during World War II, the top marginal rate reached 94 percent in 1944. The introduction of withholding taxes in 1943 and various reforms have shaped the current structure of federal income taxation.
Most taxation is done to fund wars, so we put ourselves on a permanent war footing to forever tax the public. It's not a bad time to rethink all of this.
Trump's notion that we can return to a Federal government financial structure that predates the 16th Amendment is folly, but fun to imagine. It's also a good exercise in restraint and rethinking the whole system. It brings attention to things we never think about or consider. So maybe something good will emerge.
The next four years will be very entertaining.
John C. Dvorak has reported for and published essays in numerous tech industry magazines and daily newspapers since the 1980s. Since 2007, he has co-hosted the twice-weekly, three-hour, media-deconstruction, value-for-value podcast No Agenda with Adam Curry, available at NoAgendaShow.net.
Dvorak is also the co-host of the weekly financial markets analysis podcast DH Unplugged with Andrew Horowitz, available at DHUnplugged.com. Dvorak's columns may be read and susbcribed to at Dvorak.substack.com. In his spare time, he helps publish culinary books, the most recent effort being TooManyEggs.com authored by his wife Mimi Smith-Dvorak.
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