NEW YORK (CNN/Money) - Either for charm or longevity, the Internal Revenue Service holds no candle to those spry centenarians who get the birthday shout-outs on the "Today" show.
Still, the nation's tax collecting agency has been with us for a long time, so some recognition seems in order on this, the 90th anniversary of its birth.
On Oct. 3, 1913, the agency came into being, and so did the federal income tax. Neither was any surprise love child. The IRS was the successor to the Office of the Commission of Revenue, which was initially formed during the Civil War to collect the nation's first income tax.
After the war ended, that tax was abolished, and the government went back to using tariffs and duties as its principal method of revenue generation. The income tax was reinstated in 1894, at the height of the Populist movement, but the Supreme Court quickly ruled it unconstitutional.
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| | Item | | 1913 | | 2003 | | Federal budget | $14 billion | $2.1 trillion | | Income taxes paid | $8.3 billion | $1.03 trillion | | Marginal tax rates | 1 to 7 percent | 10 to 35 percent | | IRS employees | 4,000 | 100,000 | | IRS budget | $150 million | $9.9 billion | | Tax code | 400 pages | 55,000 pages | | Tax filers | 360,000 | 131 million | | Tax freedom day | January 1 | April 19 | | | | |
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Source: IRS, Cato Institute, CCH Inc. |
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It took another 20 years, and the passage of a constitutional amendment (the 16th), before the IRS and the federal income tax system was reborn.
Since 1913, the federal budget has grown a bit, of course, from about $700 million to $2.13 trillion. That's a whopping 3,000 times larger in absolute terms, but a "mere" 150 times more in dollars adjusted for inflation.
Tax revenue swelled at a similar rapid pace, growing from less than $8.3 billion (in constant dollars) in 1914 to $1.04 trillion in 2002.
In the early days, only the rich paid income taxes. The marginal tax rate started at one percent, and topped off at seven percent. That top rate only kicked in for those with incomes of $500,000 or more, equivalent to perhaps $10 million today. Today the top rate is 35 percent.
The Internal Revenue Service, which had charge over all tax collection, had a staff of 4,000 employees. Now about 100,000 people work for the agency.
The budget for tax collection has ballooned, too. It now costs taxpayers $9.9 billion to fund the agency they love to hate. Back in those days before World War I, just less than $150 million was spent on the task.
Nobody likes to pay out substantial bills, but the IRS would attract less bile, perhaps, had the rules, regulations, and instructions involved in filing taxes not evolved into such a complicated, arcane exercise.
According to tax information provider CCH, the original tax code and related documents filled 400 pages, quite a weighty tome. Today, the tax code comprises 25 volumes totaling 55,000 pages.
In 1914, only couples with household income of more than $4,000 (about $80,000 today) even had to think about paying taxes, and many of the deductions that apply today, including mortgage interest, casualty losses, and state and local taxes, were deductible then.
A miniscule one half of one percent of all citizens, 360,000 people, paid any income tax.
Tax Freedom Day, the first day of the year that Americans start earning for themselves and not to pay off their annual income tax obligation, arrived on April 19 of 2002.
For the average American in 1914, Tax Freedom Day came early, on January 1.
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