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A Short Timeline of Taxation Practices of the USA, Chapter 3

Raleigh NC Accountant

W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

So, what happened with taxes in the United States?

US tax makers have been reaping what they have sown for a long time. The honor system has been trumped by a system in which all taxpayers are under surveillance because of the heavy threat of evading their taxes. In other words, consent has been replaced with compulsion. Honor has been replaced with espionage. If you’re feeling the pressure with today’s taxes, call a Cary NC CPA for all your tax-related needs!

In the mid-20th century, there wasn’t a bank in the US that told the IRS about customer affairs, interest was not reported, withdrawals of money weren’t reported, and nothing that went through accounts were photographed. Also, real estate transactions were not reported, stock transactions were not reported, dividends weren’t reported, income from other sources (Form 1099) wasn’t reported, and US Customs didn’t require a declaration of cash carried. Go here if you want help from a modern-day Tax Preparation in Cary, NC.

It was an honor system, and it functioned quite well. The deterioration that happened over the last 50 years to the present is that everything of any fiscal significance is now reported.

Adam Smith observed that taxes will be evaded and tax laws shown little respect when there is a general suspicion of a lot of meaningless expense and great misapplication of tax revenue. In other words, $500 toliet seats, high-dollar grants to study the sex lives of ants, etc.

Because the government wanted to catch a handful of tax resisters and evaders in the 1950s Congress spawned a tax abomination of the US tax system that more and more taxpayers attempt to bypass. As a general rule, widespread tax evasion is a sure signal that a government’s tax system is bad. People will pay taxes, even income taxes, if the rates are acceptable.

Thanks for reading! Stay tuned for more updates!

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Written on 10 February 2010 by editor under Get out of debt with No Comments
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A Brief Timeline of Tax Law of the US, Section 1

Raleigh NC Tax Preparation

W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

Between 1868 to 1913, about 90% of the national government’s revenue was derived from taxes on whiskey and tobacco. While the Civil War was going on the government instituted a short income tax, but it was not until 1913 that the 16th Amendment permitted Congress to tax incomes “from whatever sources derived.” The initial 1040’s were due on March 1, 1914. No money was withheld from paychecks and none was sent away with the return. Every taxpayer’s taxes were calculated by IRS field agents and a bill sent to the taxpayer on the first of June.

1766 - Leaders of the colonies met to protest British taxes under the Stamp Act. This Stamp Act Congress, which it was named, marked the start of the American independence movement and the origin of the United States.

1782 - The first Congress under the Articles of Confederation formed. This Congress had no powers of taxation.

1789 - Americans gave a new Congress taxing powers. Without taxing powers, the initial Congress of the U.S. barely survived seven years prior to being declared a failure; the second Congress, with taxing powers, is still functioning after almost 300 years. If you’re feeling the pressure with today’s taxes, call a CPA for Tax Preparation in Raleigh, NC for all your tax-related needs!

1792 - Alexander Hamilton coerces Congress into passing an excise tax on whiskey to raise earned income for the government and steady the increase in alcohol consumption. In the western frontier alcohol was the traditional mode of exchange, and the 25% tax was harsh. By 1794 the area was in open rebellion. The father of the IRS was spawned to give the tax enforcement. Go here if you want help from a modern-day CPA firm in Raleigh, NC.

1832 - The national debt remaining from the Revolutionary War and the War of 1812 is paid off. The South sees no reason for continued high import taxes that increase the price on goods for Southern consumers and increase the number of industrial monopolies in the North.

1850 - John C. Calhoun of South Carolina warns Congress that the South could leave the Union because heavy taxation in the South raised funds that were spent in the North, creating a great change in wealth from the South to the North.

Stay tuned for Parts 2 and 3 of the Timeline of US Tax Policy!

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Written on 08 February 2010 by editor under Get out of debt with No Comments
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A Lesson in Taxation, Part 8: Tax and The Boston Tea Party

Raleigh NC CPA

W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

Ah…. now we have a historical event clearly concerning oppressive taxes. Was the Boston Tea Party a protest concerning the British taxation on tea, as we were all taught? No, not one bit. The colonies had already been boycotting English tea for 5 years before to the Boston Tea Party! Instead, they smuggled in Dutch tea and were quite prosperous. There was tea for anyone who wanted it and no British tea tax paid. Obviously, the British didn’t like the boycott. So, the British bypassed the duties at home. The Parliament told British tea sellers to disregard the import tax of shipping the tea into England and then pass the savings along to the colonies when they shipped the tea over and thereby sold British tea at a price that was lower than the smuggled Dutch tea. If you are feeling the pressure with today’s taxes, call a CPA for Tax Preparation in Raleigh, NC for all your tax-related needs!

But what people would sell this British tea?

They sold it with the loyal British merchants in the colonies. But will the colonists buy the cheaper British tea even though it had a tax? Yes. They bought so much that what ended up happening was loyal British merchants were getting all the business and a taxes were still being given to England. However, the colonists did not care about the tax that much; they still were getting more inexpensive tea. BUT, the non-British MERCHANTS didn’t like the process. The British merchants, gaining the assistance of England, had basically created a monopoly on tea sales. The native merchants feared it was only a matter of time before more British enterprises would be established with the same mechanism and they would be forced out of business. Go here if you want help with a modern-day Tax Return in Raleigh, NC.

So, a group of MERCHANTS dressed up as Indians, boarded a ship containing British tea and tossed it into the harbor. Was this a crowning peak in American tax protest? Not at all. The Boston Tea Party was viewed as the wanton destruction of private property at a time when private property was viewed as very important. The event was extremely grave and didn’t sit well with the colonies. Ben Franklin was abhorred and demanded that full repayment would be given at once to the owners of the tea. However, it escalated into war.

However, the colonies would quickly find that fleets of war vessels, battalions of soldiers, and cannons were much scarier than a few tax collectors. The funny part is, America did not lose the war, primarily because England realized it was too expensive to wage war so far from home. BUT after the war, America faced huge debts and taxes, and even with representation they were going to be huge.

Keep an eye out for W. Marc Gilfillan’s next chapter in his History of Taxes series: Taxes and Slavery and the Civil War.

http://www.marccpa.com/

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Written on 05 January 2010 by editor under Get out of debt with No Comments
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A History of Taxation, Part 4: Taxes and The Isle of Rhodes

W. Marc Gilfillan

W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

The isle of Rhodes: a seminal connection to Rome and Greece. Any shipping from the east halted for supplies or to transfer cargo at Rhodes. The port at the city, similar to all other harbors, had a tax on all transaction - 2%. Rhodes was prosperous and flourished, in the banking and commerce industry specifically. The elite of the island erected a hundred-foot-tall bronze colossus of Apollo at the entrance to the port. It became known to us as one of the 7 wonders of the ancient world (whether it truly straddled the harbor entrance remains a mystery). If you’re feeling the pressure with today’s taxes, call a Cary NC CPA for all your tax-related needs!

Things were fine until 225 BC. An earthquake toppled the colossus and not much more is known of Rhodes following the earthquake. Did the earthquake wipe them out? Destroy the harbor? Well, here’s the remainder of the story. The Roman Senate was furious with Rhodes because during the late Rome-Macedonia War, Rhodes had maintained neutrality. After taking so much from Rome for so many years, Rome expected more. They wanted Rhodes to take their side and contribute to the war effort. Because of this, after the war, the Romans chose their course of action. They established a tax-free port on the nearby Isle of Delos. There wasn’t a two percent harbor tax! In the first year since the port was established, trade declined 85% in Rhodes. Rhodes was ruined. Go here if you want help with modern-day Tax Preparation, bookkeeping, and payroll in Durham NC.

So, was it the earthquake that ruined Rhodes’ prosperity? The answer is no, Rhodes had since rebuilt after the disaster (however, they did not rebuild the statue). What brought Rhodes down was not an earthquake or natural disaster or war or disease. It was Roman taxes. Everything to dodge a two percent tax. The Switzerland of the ancient world, the commerce giant of the east was toppled because traders wanted to avoid a 2% tax.

Keep an eye out for W. Marc Gilfillan’s next chapter in his History of Taxes series: Roman Taxes.

http://www.marccpa.com/

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Written on 01 January 2010 by editor under Get out of debt with No Comments
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