It's every American adult's most agitating time of the year - let's celebrate with some trivia!
“A person doesn’t know how much he has to be thankful for until he has to pay taxes on it.” - Anonymous
According to Investopedia, taxation can be defined as “the act of a taxing authority, usually a government, levying a financial obligation on its citizens or residents.” [1]
Taxes were first recorded in Ancient Egypt over 5000 years ago, which was then expanded by the Greeks. It’s been noted that the Rosetta Stone was a tax document proclaimed by Ptolemy around 196 BCE. Tariffs have existed just as long, starting in Anatolia (now Turkey) and Assyria (now Iraq) through wool and metal trades around 3000 BCE. Property taxes soon followed in Egypt, China, and India, where the focus was on parceling plots of land for farming. The Romans, specifically Julius Caesar, were the first to implement a sales tax (1% flat rate) and are notable for advancing how taxes were recorded and collected. Much of this occurred during the reign of Emperor Augustus when he overhauled the tax system in 1st century BCE to up the sales tax to a 4% flat rate and introducing an income tax on citizens that replaced collections based on regional averages and direct taxes on wealth. [2]
“Few of us ever test our powers of deduction, except when filling out an income tax form.” - Laurence J. Peter
Taxes, being as complicated as they are, can generally be divided into the following major groups:
Income Taxes: Collected from people’s incomes, including employment wages and salaries, tips, investments, alimony payments, unemployment checks, traditional IRA disbursements, and (in certain cases) Social Security benefits.
Payroll Taxes: Withheld from paychecks by employers for direct payment to the government (most notable one is FICA).
Sales Taxes: Collects from purchases of goods and services, paid by the end user and not the retailer. There can be multiple sales taxes at any purchase depending on jurisdiction (Federal, state, local).
Property Taxes: Collected from homeowners based on the property’s assessed value and often assessed at local and not federal level. Property taxes are also placed on vehicles in some jurisdictions.
Another type of tax often seen are “sin” taxes (applied to cigarettes and alcohol) but these vary place-to-place and are often rolled into the purchase, so they aren’t as noticeable. [3]
The legend of Lady Godiva exists due to a property tax protest. While the image of her riding naked on a horse is iconic and the name is synonymous with a chocolatier, the legend itself is rarely mentioned these days. Long story short: Lady Godiva was the wife of Leofric, Earl of Mercia, and believed that he was exploiting the citizens with exorbitant property taxes. After trying to appeal to his better nature to no avail, he challenged her to ride naked through the streets of Coventry. If she did this, then and only then would he repeal the property taxes. So she did. With only her long hair covering her and a proclamation that everyone in the city stay indoors and not look, she rode on and the taxes were soon gone. [4]
"I just filled out my income tax forms. Who says you can't get killed by a blank?" - Milton Berle
Income tax actually didn’t exist in Colonial America but the British were more than happy to use other forms of taxation: property taxes, excise taxes, poll taxes, and some prototypes of income taxes. As with the legend of Lady Godiva, taxation influenced much of the impetus behind the American Revolution. The key reason given for the war is often the issue of “taxation without representation” and if you’ve ever lived in the U.S., you know full well that there’s entire libraries written about all of this. That being said, some of the most famous of these British taxes included:
Sugar Act of 1764, which taxed sugar, wine, and molasses
Stamp Act of 1765, which taxed legal documents, newspapers, and pamphlets
Townshend Acts of 1767 which taxed about 72 items, including tea (which kicked of the Boston Tea Party) [5]
Post-American Revolution, there’s a long history of how taxes have evolved and modified – which also have entire libraries written on – but here are some important highlights during the last 234 years:
First estate tax enacted in 1797 (for funding the Navy)
The current federal income tax we know and "love" was implemented in 1913 to finance World War I
Interesting to note: while marginal tax rates existed since then, filing statuses didn't exist - all taxpayers paid the same rate regardless of household status - until implemented over time...
The current estate tax was implemented in 1916, the same year the 16th Amendment was added to the U.S. Constitution (more on that below)
The gift tax enacted in 1924
First state sales tax enacted in 1921 for West Virginia, with 11 more in 1933 and 18 more by 1940 (states still without sales tax include Alaska, Delaware, Montana, New Hampshire, and Oregon)
First collection of Social Security taxes in 1937, with first benefits paid out in 1940 [6]
“You don’t pay taxes – they take taxes.” - Chris Rock
When looking up fun facts, Jim Wang at Best Wallet Hacks compiled some unusual trivia about U.S. taxes – here are some of the most interesting:
Alabama has a 10 cent tax on a deck of playing cards.
Blueberries from Maine are subject to tax of 1.5 cents per pound sold.
New York levies an 8 cent tax on each sliced or toasted bagels.
Texas charges a $5 per customer fee on each strip club pole.
The IRS sends out over 8 billion pages in forms and instructions every single year.
21% of paper returns have errors, <1% of e-file returns have errors; do your taxes electronically.
In 2016, 74.2% of returns received refunds to the tune of $297B and the average tax refund was $2,750.
The first e-file (electronic transmission of a tax return) occurred on January 24, 1986. In 2017, only 87.1% tax returns were electronically filed.
For each $100 that the IRS collects, it costs them just thirty-nine cents.
"For patriots like me, paying taxes gives a feeling of responsibility, of being part of the fabric of our country, of contributing to the common good." - Joyce Marcel
In 1916, the 16th Amendment was ratified and included into the U.S. Constitution to offset an 1895 Supreme Court ruling that declared a major national tariff an unconstitutional income tax. It reads as follows:
“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”
Upon ratification, four states rejected the amendment (Connecticut, Rhode Island, Utah, and Virginia) and two just ignored it (Florida and Pennsylvania). As far as its importance, Constitutional law professors Joseph R. Fishkin, William E. Forbath, and Erik M. Jensen wrote it more succinctly:
"[T]he Sixteenth Amendment matters most because it has forever changed the character of the United States government, from a modest central government dependent on consumption taxes and tariffs on imports to the much more powerful, modern government that fought two World Wars and the Cold War with the vast revenue that came from the federal income tax." [7]
"Taxes are how we pool our money for public health and safety, infrastructure, research, and services--from the development of vaccines and the Internet to public schools and universities, transportation, courts, police, parks, and safe drinking water." – Holly Sklar
Only a small amount of government that don’t collect income tax, most of them are only in the Middle East (Saudi Arabia, United Arab Emirates, Oman, Kuwait, Qatar, and Bahrain) or the Caribbean (Bermuda, the Bahamas, and the Cayman Islands). In the case of the Middle Eastern states, budgets are often subsidized from oil exports and income taxes aren’t really necessary but there are high sales taxes and/or corporate taxes. [8]
"It's income tax time again, Americans: time to gather up those receipts, get out those tax forms, sharpen up that pencil, and stab yourself in the aorta" - Dave Berry
In the off-chance you want to know even more about the history and whole point of taxes, here’s some Wiki articles:
I’ve also created an addendum for all sorts of videos about taxes, what they are, and how they affect us all.
End Notes
[4] What’s written here is really just scrapping the top level of this whole story - I highly recommend reading the whole Wikipedia article linked, since it also covers what the real Godiva actually did (funded a whole bunch of monastaries), the possibility that this whole story was Puritan propaganda, and the origins of the term “Peeping Tom.”
[5] Dates pulled from “History of Taxes” (Tax Foundation)
[6] Dates pulled from “A Brief History of Taxes” (Investopedia)
[8] “Taxation Defined, With Justifications and Types of Taxes” (Investopedia)
Addendum
Update 5/21/2023 - Realizing I prefer the actual blogging potential of the Wix site over Substack, I'm going to start posting both the main listings and the addendums over here instead.
Just wrote up a miscellany on Substack about taxes due to the upcoming deadline and now here's the addendum with all sorts of videos!
Taxes, as explained by a rapping cartoon cat
Taxes (Crash Course: Economics)
Vox on how tax brackets work
Doing taxes for the first time (from Five Minute Finance)
Where do our taxes go? (from Two Cents)
"Why the IRS Taxes Illegal Income" (Half as Interesting)
A primer about the U.S. Tax System from We Grow People
"25 Fascinating Tax Facts" (Mental Floss)