Taxes in America are a Way of Life

Written by: Lilly Cobal
10/09/2019

taxes-america

Have you ever thought about the different types of taxes we pay today? We have an estate tax, corporate tax, alternative minimum tax, FICA, and a plethora of other taxes. In the early history of the United States, the people had little to no type of tax. Then, through the years, different taxes were added. Sometimes they were increased. Once in a while, they were repealed. 

It’s hard to believe that most of the taxes we have today have only been around for about half of our country’s history. The estate tax is one of the oldest. It was created in 1797. It was later repealed. Over the years it was reinstituted. This resulted in its sometimes need to finance wars. Our present estate tax was created in 1916 while the gift tax was started in 1924. Of course, the most well-known tax, the income tax, was enacted in 1913. Corporate income taxes started a few years earlier, in 1909.

Between the 1920s and ’30s, several new taxes were enacted. We had our first sales tax in 1921 in West Virginia. This tax was so popular, for state government’s to create revenue, that 11 more states created the tax in the next 12 years. By 1940, 18 more states created their own tax. Today Oregon, New Hampshire, Montana, Delaware, and Alaska are the only states without a sales tax. 

In 1935, the Social Security Act was signed into law by President Franklin Roosevelt. This tax was first collected in the first month of the year of 1937. Benefits started to be paid in January 1940. 

The AMT (alternative minimum tax) was enacted in 1978. This is a type of income tax which uses a different set of rules to calculate taxable income once allowed deductions have been considered. When it was created it was intended to prevent taxpayers from avoiding paying their “fair share” of taxes. Since it is not indexed to inflation, more taxpayers have been subject to AMT over the years. As a result, there has been a resounding call to reform or eliminate this tax.

Aside from these best-known taxes, we face many others each day. Some of these are cigarette, alcohol and energy taxes. There are also the dreaded property taxes. Aviation and telecommunication taxes are also paid by many people. Then there are the state income taxes. If this sounds like a lot of taxes, it is. It has been calculated, by the Tax Foundation, that Americans work through April 11 of each year, on average, simply to earn the money needed to pay their taxes for just one year. This has resulted on April 11 is known as tax freedom day. 

Through the years there have been some interesting taxes created named the “sin tax.” Two of these include cigarette and alcohol taxes. These taxes are both built into each package or container. As a result, some people are not even aware they are paying the tax. 

The federal tobacco taxes were created in 1794. It was “on-again, off-again” through 1864. A person, at that time, would pay 0.8 cents for a pack of 20 cigarettes. By 2009, the rate had increased to $1.01 for a pack of 20. In addition to the federal tax, states have their individual tax on cigarettes. In 2009, South Carolina had the lowest tax at 7 cents per pack. The tax on a pack of cigarettes in Rhode Island was $3.46.

The “sin tax” on alcohol is divided among spirits, wine, and beer. Each one is taxed differently. Both the federal and state governments tax alcohol. In 2008, taxes amounted to $13.50 per proof gallon of spirits. Wine ranged from $1.07 to $3.15 per gallon. This depended on the alcohol content of the wine. Beer was taxed per 31-gallon barrel at $18. 

Each type of alcohol is taxed differently by each state according to its type. In 2009 the lowest rate for spirits was in Maryland at $1.50 per gallon as opposed to the highest rate in Washington at $26.45 per gallon. Lousiana had the lowest tax on wine at 11 cents per gallon followed by the highest tax of $2.50 per gallon in Alaska. Beer, in Wyoming, was taxed at 1.9 cents per gallon compared to $1.07 per gallon in Alaska.

The “sin taxes” on cigarettes and alcohol were created to pay back money owed from the Revolutionary War. It is also believed that social purposes have influenced the taxes on cigarettes and alcohol. It is further believed that the higher taxes are, on each product, the less likely Americans will smoke their cigarettes or drink their alcohol. The unfortunate result, however, is that these flat taxes result in the poor paying a disproportionate amount. While the poor pay these taxes, which deeply dig into their budget, other income groups can afford the higher taxes.

The taxes on gasoline continue to rise. These taxes were created long before the environmental movement started. Federal taxes on gasoline, excise taxes, started in 1932. They came about under the administration of President Herbert Hoover as part of the Revenue Act of 1932. The original purpose was to increase the government’s “kitty” it had at its disposal. It was expected to bring in $150 million for the government in new tax revenues. During this year the tax was 1 cent per gallon. In 2009 the tax had risen to 18.4 cents per gallon. As with the other taxes, each state has their own additional tax on gasoline. In recent times some gasoline taxes in different states have created a major burden for taxpayers.

Taxes are a way of life. This can be seen by the fact that every American must work from January 1 to April 11 of each year just to earn enough money to pay their taxes. Unfortunately, as the United States changes, all of these taxes will most likely increase in the future. Little hope can be held that taxes will decrease during our lifetime. Most Americans have accepted the fact that taxes are a part of everyday life.


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Taxes in America are a Way of Life

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