

INCOME TAX 



2938 



INCOME TAX 



vestments or from inherited wealth the tax 

 should be larger, they say, than if a man really 

 works for a salary or manages his own business, 

 because in the latter case the income ends 

 with one's working life. 



Although a limited form of income tax was 

 in force in England for a few years in the 

 middle of the fifteenth century, this form of 

 taxation is distinctly a nineteenth century de- 

 vice. It was first used by England during the 

 Napoleonic wars, soon after 1800, when the 

 nation's huge expenditures made new sources 

 of revenue necessary. It continued in force 

 as a war measure until 1815, but in 1842 it 

 was revived and has since been a fixed feature 

 of the English fiscal system. Soon after the 

 outbreak of the War of the Nations in 1914 the 

 British income tax was greatly increased, espe- 

 cially on the largest incomes; this was one of 

 the quickest and surest methods of increasing 

 the government's revenue. In other European 

 countries, in Austria, Germany, Italy, Switzer- 

 land and elsewhere, income taxes are also in 

 force. In Canada taxation of incomes has not 

 yet been resorted to. In all there are about 

 fifty countries or states, having a population 

 of nearly 700,000,000, which tax incomes. 



Tax on Corporations. All corporations, joint- 

 stock companies and associations, not including 

 partnerships, are also required to pay a tax on 

 their net incomes from all sources. If, how- 

 ever, the corporation is organized under the 

 laws of a foreign country it is required to pay 

 a tax only on that part of its income from its 

 home operations one per cent of the net in- 

 come. It should be noted, however, that labor 

 and agricultural organizations are exempt from 

 taxation, as are also fraternal and benefit so- 

 cieties, building and loan associations, chambers, 

 of commerce and boards of trade, and any or- 

 ganizations conducted solely for charitable, 

 scientific or educational purposes. 



In the United States. In the United States 

 as early as 1812 the Secretary of the Treasury 

 advocated a Federal tax as a war measure, but 

 his advice was not heeded. In 1862 Congress 

 passed an income tax law which remained in 

 force until 1872, and yielded a total of $376,- 

 150,204. It was not very satisfactory in its 

 operation, and no further attempt was made 

 to tax incomes until 1894. The income tax 

 law of that year was declared unconstitutional 

 by the Supreme Court of the United States on 

 the ground that it was a direct tax, and was 

 not divided among the states according to 

 population, as required by the Constitution. 



The desirability of a Federal income tax, how- 

 ever, was slowly becoming recognized, and a 

 movement arose to amend the Constitution so 

 that tax need not be proportioned among the 

 states according to population. This amend- 



WHERE EXTREMES MEET 

 The map represents the lower portion of New 

 York City. The two divisions shown are Federal 

 districts for collection of income and corporation 

 taxes. The second district is the richest region 

 in the world two square miles in which about 

 15,000 persons normally have incomes exceeding 

 a billion dollars. From here the government col- 

 lects more than one-fourth of its total income tax 

 and nearly one-fifth of its corporation tax. The 

 first district is the most populous spot in America, 

 and possibly in the world ; it contains the famous 

 "East Side," or the Ghetto, and it contributes 

 practically nothing to either tax. 



ment the Sixteenth was submitted by Con- 

 gress to the states in 1909 and was declared 

 ratified in 1913. It was phrased as follows: 



The Congress shall have power to lay and col- 

 lect taxes on incomes, from whatever source 

 derived, without apportionment among the several 

 States, and without regard to any census or enu- 

 meration. 



The way then being clear, an income tax 

 was incorporated in the Underwood-Simmons 

 tariff law of 1913. 



The Law of 1913. This law provided a tax on 

 all yearly incomes of over $3,000 for unmarried 

 persons and on over $4,000 for those married. 

 Thus a married man earning $4,000 was exempt ; 

 an unmarried person with the same income paid 

 a tax on $1,000. All incomes above exemption 

 and $20,000 were taxed at the rate of 1%, and 

 this was called the normal tax; above $20,( 

 an additional graduated tax, or surtax, 

 levied. 



