Taxes: How Did We Get Here?

by | Aug 22, 2019 | News | 0 comments


Can you count all the taxes you pay on one hand? How about two? As Americans, we are deluged in taxes, including on our income, investments, gifts, and everything in between. Of course, we weren’t hit with them all at once. When America was first established, taxation was slim to none. But as the country grew, taxes were piled on, removed, re-added, and so on.  To understand taxes that exist so heavily in America, we must investigate the foundation of the taxes we’re subjected to today.

One of America’s oldest and still standing taxes, the estate tax, was constituted in 1797 to support the creation of our Navy. In 1916, the Revenue Act changed the purpose of the tax to what we know today. The estate tax was proposed as an alternative to the death taxes that were administered to obtain money for political purposes such as wars.

The federal government used to receive 95% of its revenue from tariffs. In 1913, the federal income tax was imposed to fund war efforts. This new and scary income tax proposed a 1% collection on net incomes of at least $3,000 (about $78,000 in 2019) and 7% on incomes of at least $500,000 (about $13,000,000 in 2019). Over the years, the US added tiers of taxation based on increasing levels of wealth. It fluctuated from sky-high to unbelievably low until it became what we have today.

Americans saw a trend of new tax laws in the 1920s and ‘30s. The most notorious, sales tax, is still implemented today. This tax is hidden everywhere—in your bottle of soda, your vacation, and even hygiene products! Virginia became the first state to impose sales tax in 1921. It didn’t take long for other states to join the bandwagon. Delaware, Alaska, Montana, Oregon, and New Hampshire are the only 5 states that resisted the sales tax trend.

The Social Security Act is another hefty tax many Americans pay. It stands to be one of the most controversial Acts to date as there are mixed opinions on whether it was a failed experiment or innovative plan. Signed in 1935, the first Social Security taxes were collected in January 1937, but benefits were not distributed until January 1940. Today, many Americans have a misconception of this plan. Though it is possible to live off social security, it can be very difficult.

What Now?

Americans pay taxes on so many items that it’s easier to make a list of things we’re not taxed on. Did you know an untouched bagel in New York is tax-free but as soon as it’s sliced or buttered, it’s subjected to 8.875% sales tax because it’s no longer unprepared?

In 2009, the Tax Foundation determined the average American pays over a quarter of their yearly income to just taxes.

This begs the question: what can I do to reduce my taxes?

The most efficient way to do this is through tax planning. Rather than looking for deductions, our methods plan your taxes for the next 5, 10, 15, even 30 years. To get more information on tax reduction strategies, schedule a complimentary consultation and learn how you can potentially save tens of thousands of dollars in taxes a year! You can click the link in the description below or call 1-800-467-8152. You can also drop an email at