From the course: Accounting Foundations

The history of income taxes

From the course: Accounting Foundations

Start my 1-month free trial

The history of income taxes

“

- [Instructor] You may have heard the Benjamin Franklin saying, "In this world, nothing can be said to be certain, "except death and taxes." - Yeah, taxes have been with us since civilization began. In order to perform essential services, governments need money. That money has most frequently come in the form of taxes. - [Instructor] Taxes have been a part of human society for thousands of years. For example, in ancient Egypt peasants too poor to pay their taxes were required to provide forced labor on public projects such as the pyramids. - And unpopular income tax was launched by Chinese Emperor Wang Mang in the year 9 A.D. The tax rate was 10% of profits. The emperor deposed 14 years later. - The first income taxes weren't collected in the United States until the American Civil War in the 1860s. Income taxes were not a permanent part of the US Federal government financing until 1913. - Yes and those first US income tax rates in 1913 ranged from 1% to just 7%. - Now, if you think about the practical difficulties associated with computing and collecting income taxes, you'll understand why governments have historically relied on other taxes, such as property taxes, head taxes, that's a certain amount per person, and import/export taxes. - [Instructor 2] There are substantial practical difficulties associated with an income tax. First of all, what is income? What expenses or acceptable deductions when computing this income? How will the tax be collected? Will the reported income be verified? And if so, how? - One approach to this practical difficulty has been for governments to subcontract the collection of income taxes. In biblical times, these tax collectors were called publicans. They're also called tax farmers. - One famous French tax farmer was Antoine Lavoisier, the father of modern chemistry and the discoverer of the element oxygen. Tax farmers were a targeted group in the French Revolution, and Lavoisier was beheaded at age 51. - Now, these days, we don't use the term tax farmer. Governments around the world now collect their own income taxes, some more successfully than others. - Right now let's get an introduction to the theory and practice of income taxes.

Contents