Tax laws affect all citizens of the United States. Various facets of the economy rely on correct application of tax laws. Tax professionals play a critical role in assisting individuals as well as businesses comply with these complicated laws. To correctly compute an individual’s taxes, a brief historical review of how the United States got here is necessary.

How did these laws come to be in the United States? In this unit, you will briefly review its history.

The first federal income tax was passed in 1861. When was the next one passed and why was it necessary? Why was pay-as-you-go withholding needed in 1943?

Canyou make response each posted below? # 1 to 3 posted

1. Christy Brown posted Apr 22, 2018 1:40 AM

Good evening classmates and Prof,

The federal income tax was originally passed in 1861 to fund the civil war but was soon put to sleep after the war was over. In 1894 the federal income tax was reinstated to help the government again fund their operations. In 1895 the federal income tax was deemed unconstitutional and the 16th amendment was put into place. in 1943 a pay-as-you-go withholding was put into play to avoid certain tax collection problems and allowed to have tax expansions for better coverage of financial needs within the government.

Reference

Pope, T. R., Rupert, T. J., Anderson, K. E. (2018). Pearson's Federal Taxation 2018 Individuals, 31st Edition. [Purdue University Global Bookshelf]. Retrieved from https://purdueuniversityglobal.vitalsource.com/#/books/9780134562100/

2. Shaun White posted Apr 21, 2018 11:26 PM

Hello Class,

The 2nd federal income tax was passed in 1913 with the passing of the 16th Amendment. It was necessary because after the initial taxation of 1861-1865 to help pay for the civil war, they attempted to bring back the tax in 1895 but it was "ruled unconstitutional by the US Supreme Court" (Pearson Education). By making the tax part of the constitution itself voided the charge of it being unconstitutional.

Pay-as-you-go withholding was needed "to accommodate the broadened tax base and to avoid significant tax collection problems" (Pearson Education). According to Pearson Education, by 1939 less than 6% of the population was being taxed. In order to help fund World War II, that number quickly grew to 74% in the next 6 years.

Moral of this discussion is that wars are expensive!

3. Elisha Johnson posted Apr 21, 2018 10:48 PM

Hello Everyone,

Hope you are all finding yourselves well tonight! So, our first question is "How did these laws come to be in the United States"? The simplified answer is that it began with the Revenue Act that was instated in 1861, which allowed for personal incomes to be taxed in order to provide needed funds for the war; this act remained in effect until four years later, in 1865. The flat rate federal income tax was then opposed shortly thereafter, only to be reinstated in 1913 when the 16th amendment was passed. These laws were later codified into internal revenue code. The pay-as-you-go withholding was needed during 1913 because our government had financial needs during the war and this allowed for the tax base to be 'expanded'. Internal revenue code was also created in efforts to anticipate and hopefully, avoid altogether any tax collection issues altogether.

Sincerely,

Elisha Johnson

References:

Pope, T. R., Rupert, T. J., Anderson, K. E. (2018). Pearson's Federal Taxation 2018 Individuals, 31st Edition. [Purdue University Global Bookshelf]. Retrieved from https://purdueuniversityglobal.vitalsource.com/#/books/9780134562100/