Monday, April 05, 2010

Tax Deadline Approaches: Bring Us Back to 1913

Page 1 of the original IRS 1040 income tax form from 1913 appears above. There were only four pages in the original 1040 form, including two pages of worksheets, the actual 1040 form above, and only one page of instructions, view all four pages here. In contrast, just the current 1040 instructions, without any forms, runs 175 pages.

Individual income tax rates started at 1% in 1913, and the maximum marginal income tax rate was only 6% on incomes above $500,000 ($11 million in today's dollars). The personal exemption was $3,000 for individuals ($66,000 in today's dollars) and $4,000 for married couples ($87,500 in today's dollars), meaning that very few Americans had to pay federal income tax since the average income in 1913 was only about $750.

13 Comments:

At 4/05/2010 8:00 AM, Blogger Bruce said...

The top rate was actually 7%. If you read the form carefully you will see that there was a "normal" tax of 1% that everyone paid and then a surtax that went as high as 6% above the normal tax.

 
At 4/05/2010 8:10 AM, Blogger Mark J. Perry said...

Bruce:

I'm not sure that's correct. If you look at Instruction #1 it says:

This return shall be made by every citizen of the United States, whether residing at home or abroad, and by every person residing in the United States, though not a citizen thereof, having a net income of $3,000 or over for the taxable year.

 
At 4/05/2010 8:37 AM, Anonymous Rand said...

Mark and Bruce:

All this shows is that the United States Internal Revenue (Service) was incapable of writing clear and simple instructions even one hundred years ago.

 
At 4/05/2010 9:16 AM, Anonymous Lyle said...

If you read it it says on 8 that if the total income exceeds 20k then the following surtax applies (note that this is a gross tax no deductions apply here) Then on the final 3 lines it combines the surtax, the regular tax and figures the tax liability.
Note that this first tax had the citizen pay tax no matter where he resided.

 
At 4/05/2010 9:43 AM, Blogger Ironman said...

Don't forget that you can do your 1913 taxes here!

 
At 4/05/2010 10:53 AM, Blogger Eric said...

I wander why flat tax was never seriously considered

 
At 4/05/2010 12:27 PM, Anonymous Bill said...

I note that in 1913, there was no double taxation of stock dividends. When did double taxation start?

 
At 4/05/2010 1:38 PM, Blogger OA said...

Eric said...
I wander why flat tax was never seriously considered



I wonder if it is simply due to 1% being easy to calculate and math check, but then not giving quite enough revenue. Even 1.1% or or 2% would have led to a lot more errors.

 
At 4/05/2010 3:47 PM, Anonymous Lyle said...

Oa note that the super tax was essentially a flat tax, it was on total income (line 3) above 20k at various rates.

 
At 4/05/2010 6:16 PM, Blogger OA said...

I don't what definition you use for flat tax Lyle, but that extra tax looks like a progressive tax rate schedule to me.

1% extra for income between $20k to $50k, 2% extra for income between $50k to $75k, 3% extra for income between $75k and $100k, etc.

 
At 4/05/2010 8:43 PM, Anonymous Lyle said...

I meant no deductions, just a gross income tax, flat in that sense that no preference was given to any activity.

 
At 4/05/2010 9:28 PM, Blogger Lyric said...

Avg income was $750 in 1913 or 1931?

 
At 4/05/2010 9:56 PM, Blogger Mark J. Perry said...

Lyric: Thanks, it was a mistake, it should be 1913, not 1931. It's fixed now, thanks for pointing it out.

 

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