Money & Finance

How income tax has changed in 100 years

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If you’re getting ready to file your income tax return, you should be interested to know that what you’re doing started 100 years ago. But what a difference that century has made! Examples:

When Congress passed the income tax law in 1913, a couple making over $4,000 in taxable income after all deductions was subject to a 1% tax rate.

With inflation that $4,000 then is equal to about $93,700 now. But the tax rate now is 25% or more for those in the $100,000-plus salary range.

Taxing income may be one of the fairest ways for the government to raise money to pay its bills. But the tax payments really need to more properly reflect income and expenses.

Today’s tax code does that badly. It’s 73,954 pages long and filled with giveaways to groups that have enough political punch to get them.

There’s lots of talk in Washington now about tackling that problem this year by simplifying the code for the first time since 1986. Good. But simplification doesn’t necessarily equal fairness.

College, for instance, has gotten so expensive that many parents — particularly those with more than one child — can’t afford it. Their kids can get loans, but then they’re left with big debts that slow down their start in life. That’s not good for them, and it’s not good for the USA.

The tax code needs to account for expenses like those. It also needs to help those who are trying to help themselves, whether they’re trying to compete for job and salary gains or to start a new business.

If we look back at the 100 years since the income tax arrived, we’re more likely to come up with the right formula for the future.

But it’s important that our goal is to help the average American to compete with his or her peers.

(c) Copyright 2013 USA TODAY, a division of Gannett Co. Inc.  

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