Taxation History of the United States

The taxation history of the United States begins in 1760, with colonial protest against the taxation policy of the British, which lead to the American Revolution. Taxes were collected on imports, whiskey and on glass windows for a while by the independent nation. States and localities collected property tax on commercial building and land.

State and inheritance taxes began at the starting of 20th century. The sales tax was started by state government during the 1930s. Income taxes were imposed by the United States for a brief period during the 1890s and he Civil war. It was imposed on a permanent basis from 1913.

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Colonial taxation

During the colonial era, taxes were low a colonial, local and imperial level. The issue whether parliament could impose taxes on the Americans led to the revolution.

  • Stamp Act (November 1, 1765): It was the fourth stamp act that was supposed to be passed by British parliament. According to the act, all legal documents, newspapers, wills, commercial contracts, permits and [playing cards in American colonies was required to carry tax stamp.
  • Townshend Revenue Act (1767): Two tax laws were passed by the Parliament which were proposed by Charles Townshend
  • Sugar Act (1764): Taxes were imposed on the non-British exports like sugar, coffee and cloth.
  • Tea Act (1773): It was a drawback of duty and tariff on tea.
  • Boston Tea Party: The American colonists protested against Great Britain for Tea Act by dumping chests of tea into the Boston Harbor.

Tariffs

Tariff played various roles in the economic history of the United States and trade policy. They were the biggest source of federal revenue between 1790 and the eve of World War I. After that, it was surpassed by income taxes. Tariff also played a role in protection of the local industry. It generated some political stress during the 19th century.

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Excise Tax

Federal excise taxes are applied only to certain items like tires, motor fuel, telephone usage, alcoholic beverages and tobacco products. Often, excise taxes are allocated to special funds which are related to the activity or object taxed. To fund his policy of assuming war debt of American Revolution, tax on distilled spirits was proposed by Alexander Hamilton when George Washington was the president. The legislation was approved by the House after a vigorous debate. Seven cent per gallon was imposed on whiskey.

Income Tax

Income taxes began during the 19th century in the United States when income taxes were imposed for funding the war efforts. The constitutionality of the income taxes was in doubt until the Ratification of 16th Amendment in 1913. Article 1, Section 8, Clause 1 of the Constitution allows imposing of tax, duty, impost and excise. Article 1 Section 8 requires duties, excises and imposts to be uniform throughout United States.

In 1916, Congress re-adopted income tax with 1% tax on personal income over $3000 and 6% on net income over $500,000. By 1918, the income tax was increased to as much as 77% for financing World War 1. The top marginal tax rate kept reducing till it reached 24% in 1929. During the Great Depression, the tax rate keeps increasing steadily.

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