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Income taxes in 1871

July 7, 2012

[J.P.'s Moment of Common Sense on Broad View, KBZZ 1270 AM and 96.1 FM in Reno. Listen to Broad View live Saturdays at 2:00 PM Pacific Time.]

This time of year, when we celebrate American independence, is a good time to look at history in general. At least it is for me. I’m kind of a nerd that way. I find history fascinating, especially when it shows me something surprising and I definitely learned some surprising stuff this week.

Wednesday’s Independence Day was only six days after the Supreme Court pounded the last nail in liberty’s coffin, which certainly added a nasty gob of bitter irony to the celebrations, and furthermore the hammer used to pound that nail was the power of Congress to tax. Chief Justice John Roberts, may his name live in infamy, decided that our federal government can do anything it wants as long as they call it a tax.

So wouldn’t you know, while going through some old papers this week, I found an income tax return from 1871. That’s already fairly surprising if you know your history. Most of us think the Sixteenth Amendment empowered the federal government to levy income taxes and that wasn’t passed until 1913. So how could they have an income tax in 1871?

Well, here’s the scoop: Congress passed an income tax in 1861 to finance the Civil War and then repealed it in 1872. Imagine that! Call it the second surprise, that apparently there was a time when congresscritters had enough honesty and self-discipline to repeal a revenue source. Can you imagine today’s politicians ending the income tax?

Hell will have ice hockey and pigs will fly like humming birds before that happens.

The third surprise was the utter simplicity of the 1871 tax form. The sum total of what the Internal Revenue Service gave Americans was four pages, which included one page of instructions and two pages of signatures. If you’re counting, that leaves only one page that taxpayers had to fill out. They needed two pages for signatures because you signed in different places according to whether you earned more or less than the exemption amount, which was $2,000—and the form also needed the signature of your county assessor.

By the way, that $2,000 exemption in today’s dollars would be about $50,000, which is thirteen times higher than our current exemption of $3,800.

There’s a copy of this 1871 income tax form on my website if you want to see for yourself how simple it was:

Basically you listed your income, subtracted your losses and whatever state and local taxes you’d already paid, subtracted $2,000, then paid 2½% of the balance to the feds.

That’s the fourth surprise, that the income tax rate was only 2½%:

Our current top rate is 35%, slated to rise to 39.6% on January 1... sixteen times higher than the tax rate in 1871 and I’m not even counting Social Security taxes. Yet for some reason today’s federal government, with an exemption one thirteenth the size and a tax rate sixteen times higher, is running massive deficits that threaten to bankrupt the nation.

Not only was the tax rate remarkably lower in 1871, they decided in 1872 they didn’t even need income taxes.

Times are different, you’re thinking, but not that different. The Civil War was costly—in human lives, in the amount of money spent waging it, and in the amount of reconstruction needed afterward. Remember, we were both sides of that war, so the United States had to finance two armies and suffer the destruction from two armies. The South was practically destroyed economically. Yet seven years after the war ended everything was paid off, the budget was in the black, and they ended the income tax.

It certainly makes you wonder, doesn’t it?

I can tell you how they did it. They didn’t have congresscritters going to Washington for the sole purpose of getting rich from the job, and they didn’t have massive federal bureaucracies involved in activities the federal government has no business being involved with—like education, energy, agriculture, and housing for example. When’s the last time anybody got any education from the Department of Education? As for housing, the federal government is responsible for ruining home values. Meanwhile, the Agriculture Department has been a multi-billion-dollar boondoggle for decades, plus they’re the yahoos who turn half our corn crop into ethanol to run cars down the road, even though most of us don’t want ethanol in our cars and it makes food prices soar.

And don’t get me started on the idiotic Energy Department, which spent the last three years throwing money into bankrupt windmill companies, bankrupt solar panel companies, bankrupt electric car companies, and bankrupt battery companies.

The power to tax, the power which John Roberts used to justify Obamacare, is no longer used to run the limited federal government designed by the Founding Fathers. The power to tax has become the power to reward and oppress, used by crafty, dirty, megalomaniacal politicians to reward themselves and their friends at the expense of the rest of us.

It’s too bad Mr. Roberts is so sheltered within the Washington, D.C., cesspool he didn’t know.

That's... today’s dose of common sense.

"The marvel of all history is the patience with which men and women submit to burdens unnecessarily laid upon them by their governments." – George Washington

"History will be kind to me for I intend to write it." – Winston Churchill

From Grand Rapids, Michigan, USA       

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