It’s that time of year again. Income Tax returns for 2021 are due on Monday, April 18th. Do you ever wonder where your Federal Income Tax dollars go?
The receipt below is for a hypothetical tax bill of $10,000.00 for 2020 and shows how that money is spent by the federal government.
2020 FEDERAL Income Tax Receipt
April 15, 2021
Health Programs $2,922.07
Military & Defense $2,357.00
Interest of Federal Debt $1,482.89
Social Security and Unemployment $675.01
Veterans Benefits $608.38
Food and Agriculture $378.87
Housing and Community $224.89
Energy and Environment $130.28
Internal Affairs $126.60
Over two-thirds of total tax receipts go to the first three line items: health programs, military and defense spending, and interest on the debt.
That in itself is frightening enough, but the interest on the debt is projected to grow from approximately 14% today to over 40% by 2040 if nothing changes. Not only is that unsustainable, it should be criminal.
The first Federal Income Tax was imposed by Congress in 1861 when it passed the Revenue Act of 1861 to help fund the War Between the States. A flat tax of 3% was imposed on incomes above $800.00 ($22,800 today). The Revenue Act of 1862 added a progressive taxation structure to the federal income tax, implementing a tax of 5% on incomes above $10,000 ($285,000 today). This income tax remained in effect until 1872 when it was repealed.
In 1894, the Democrat controlled Congress passed the Wilson-Gorman Tariff which imposed the first peacetime income tax. The rate was set at 2% on income over $4000, which meant less than 10% of households would pay any income tax. In 1895, the US Supreme Court ruled in Pollock v. Farmers' Loan and Trust Co. that part of this tariff was unconstitutional, effectively rendering the income tax impractical.
This ruling prompted Congress to propose the 16th Amendment granting Congress the power of the Federal Government to collect taxes on income which was ratified on February 13, 1913.
The top tax rate in 1913 was 7% on incomes above $500,000 ($12.9 million today). The highest tax rate ever imposed (92%) was imposed in 1952 and 1953 on incomes above $400,000 ($3.85 million today).
The top tax bracket for 2021 is 37% percent on income over $523,600 for single tax payers and $628,300 for married tax payers. For 2022, the top tax rate remains the same but the limits are increased to $539,900 for single tax payers and $647,850 for married tax payers. And Joe Biden is proposing even higher tax rates.
Surprised? You shouldn’t be. Spending is what government does best. In fact, it’s the only thing it does well.
Mad? You should be. You should be angry as hell.
Going to do something about it? I hope so. If not, why not?
We are in the midst of the 2022 election cycle and we get to elect all of our Congressmen/women and one-third of our Senators in November. If you intend to vote for the same elected representatives that are responsible for this financial fiasco, then you will get what you deserve and have no right to complain.
Albert Einstein said “The definition of Insanity is doing the same thing over and over again and expecting different results.”
If you want different results, then maybe it’s time for you to vote for someone different.
Think about it!