With tax season right around the corner and rumors that the feds may or may not have hired 87,000 new agents to watch our Venmo accounts. The history of the IRS has always been a strange but true kind of adventure.
For those unfamiliar with the IRS, first, bravo. Second, watch your six. The IRS stands for the Internal Revenue Service (IRS), an agency of the United States Department of Treasury responsible for tax collection and enforcement of tax laws. The IRS is one of the oldest agencies in the United States federal government.
The Weird History Of The IRS
Its origins date back to 1862. This was the year that President Abraham Lincoln signed the Revenue Act. This Act established the Office of Commissioner of Internal Revenue and created the first income tax in the United States. Can anyone guess the reason for the original income tax? If you guessed to finance the Civil War, you would be correct. The primary purpose of the IRS at that time was to raise revenue for the war effort by collecting taxes on income and a range of other goods and services. Taxing citizens to pay for a war sounds familiar.
However, income taxes were not meant to be permanent at the time. It was only meant to be a temporary revenue stream. Seems innocent right? The Revenue Act was repealed in 1872. But like a good drug, once someone gets that initial taste for it, they crave more and more. They keep chasing that high. Even though they know it is wrong, they can’t help themselves. So in 1894, the income tax was re-established; but then the Supreme Court tried to save us from ourselves and declared it unconstitutional the following year. Smooth sailing, right?
Where Does All The Money Go?
We know that is not true. In 1913 our lovely government ratified the 16th Amendment to the United States Constitution; this gave the federal government the authority to collect income taxes. Then the following year, the Bureau of Internal Revenue was established, that later became the Internal Revenue Service that we know and loath in 1953.
So now we know the history of the IRS, what other info is important to know? Well, first off, the tax code. This started as a simple one-page document that required very little information. Well, now it is significantly longer. The current version of the tax code consists of more than 3.9 million words. The print version of the tax code is typically more than 4,000 pages long. Pretty wild, right?
Every year the government has wild new tax codes that you are supposed to follow. You then do your taxes and guess how much you owe the government from the work you put in all year long. Then they can audit you, and if you were wrong, you have to pay penalties and maybe even go to jail. Fun stuff.
Here are some examples of strange IRS laws to watch out for:
- Taxes on illegal income: Even if you earn income from illegal activities like drug dealing, you must still report that income and pay taxes on it. The IRS doesn’t care where the money came from; they want their cut.
- Tax on prizes and awards: If you win a prize or award, such as a car or a trip, you may be required to pay taxes on the fair market value of the prize. This can surprise some people who may not have the cash to pay the taxes on the prize.
- Alimony and child support: Alimony payments are taxable income for the recipient and tax-deductible for the payer. Child support, on the other hand, is neither taxable nor deductible.
- Hobby income: If you have a hobby that earns you some income, such as selling crafts online, you must still report that income and pay taxes. However, you can also deduct your expenses related to the hobby, but only up to your income.
Keep On Giving
These are just a few odd IRS laws allowing the federal government to get paid. But is the IRS all take, take, take? Or do they give back? Indeed they do some good with our income tax dollars. What do they spend all of that money on? According to my research, the revenue is used to fund various government services and programs. Some of the most significant expenditures include:
- National defense: This includes funding for the military, intelligence agencies, and national security initiatives. Just don’t ask about the audits.
- Social Security and Medicare: These programs provide retirement benefits and healthcare for older Americans, but they have been facing significant financial challenges as of late and may or may not exist in future years.
- Healthcare: Income taxes also contribute to funding programs such as Medicaid and the Children’s Health Insurance Program (CHIP).
- Education: Income taxes help fund public schools, universities, and financial aid programs. We all know that our education system, from the bottom up, requires an overhaul.
- Infrastructure: Income taxes are used to maintain and improve roads, bridges, public transportation systems, and other public works projects. Look no further than Ohio to know that this needs some attention.
- Law enforcement: Income taxes support police, courts, and prisons.
- Social welfare programs: Income taxes fund programs such as food stamps, unemployment insurance, and housing assistance for those in need.
- Scientific research: Income taxes fund research in various fields such as medicine, energy, and technology.
Giant Source Of Revenue
The exact allocation of income tax revenue to each of the above varies. But we can all probably agree that the above items deserve funding. Whether funds are properly allocated to them from our income taxes, well, that is to be debated another day.
There have been rumors that some in our government are trying to abolish the federal income tax, which is interesting. But what would that look like if that were to happen? Remember that the federal income tax is the largest source of revenue for the US government, accounting for over half of all government revenue. If the tax were eliminated, the government would lose significant revenue, which could impact its ability to fund essential programs and services.
This would lead to budget cuts and increased borrowing, increasing our national debt, which is already out of control. Aside from those items, the government would find other sources of revenue to make up for the loss of income tax revenue. Do you know where this is going? This would mean increasing other taxes, such as sales or property taxes, disproportionately affecting low-income earners.
The Industrial War Complex
So, in conclusion, the history of the IRS was started to fund a war, and our tax dollars still fund wars worldwide. If we eliminate the IRS and the federal income tax, those wars and other items will still need to be funded so that the government will get paid one way or another. You know the quote:
“In this world, nothing can be said to be certain except death and taxes.” – Benjamin Franklin
Love Weird History? Be sure to check this out: The Government Poisoned Booze