As you work on your tax return preparation for the April 15th deadline, you may be wondering how this process got started in the first place. The history of taxes in the U.S. has evolved over time into the system in place today. Below is everything you need to know about the origins of our tax system. 

Abraham Lincoln & the First Federal Income Tax

With fears that the government lacked the financial backing necessary to fund the Civil War, Abraham Lincoln signed the Revenue Act in 1861. This act placed a 3% tax on all incomes over $800 in an attempt to pay for the war effort. According to this legislation, income was broadly defined as financial gain from employment, property, and trade, both within and outside of the U.S. While the act was repealed only ten years later, it set the stage for the 16th Amendment. 

Income Taxes Levied Across the Nation

The 16th Amendment reversed an 1895 Supreme Court decision that stated a nationwide tax could not be imposed due to disagreements about direct and indirect taxes. Conversely, language within this amendment stipulated that Congress has the power to lay and collect taxes without apportionment, which links a state’s population to its total tax burden. Many people posit that this tax system, which created a reliable source of revenue for the government, was integral in making the U.S. a world power.

Why Paying Income Tax Is Necessary 

As you’re working on your personal tax return preparation, consider what your tax dollars fund. On the local level, taxes help build schools and pay for police and firefighters. State taxes make it possible for people with health or mental issues to access essential services and funds to care for their families. Additionally, federal taxes go towards disaster relief, education, health programs, and military funding.

Now that you know the history behind taxes, it’s time to get started on your tax return preparation. In Stow, OH, Michael C. Davis, CPA can help businesses and individuals untangle tax issues, while also offering many other essential accounting services. These include payroll, bank reconciliation, business counseling, financial reporting, and tax refund tracking. If you have questions about tax return preparation, be sure to call (330) 376-1099 to schedule a consultation. You can also learn more about the services offered by visiting the website. With more than three decades of experience, you know you can rely on this accounting firm.