The income tax is 100 years old this year, having ‘been born’ on February 3, 1913. The income tax itself, however, is quite a bit older having been born during the Civil War. Originally the income tax was about raising money for war, and the ‘modern’ income tax was born amidst the struggle against alcoholism that culminated in Prohibition. The government received a lot of revenue from alcohol taxes, and the income tax was one way to make up lost revenue from prohibition.
California Income Tax TriviaCalifornia has its own tax history, of course. Currently, California is busy becoming the highest tax state in the Union with new policies designed to tax higher income earners at higher rates. The debate is whether a) this is fair, and b) whether this will result in ‘tax flight,’ as higher income earners and businesspeople ‘flee’ California for lower tax states.
Other famous tax historical events of course are California’s Proposition 13, which limited property taxes.
Finally, there is no point in looking back at the 100 years since the birth of the modern income tax without looking forward. As a successful top tax service in San Francisco, our job is to look forward for our clients. Among the many issues are whether taxes will go up, or down, in the long term, and whether things like using retirement accounts to defer taxes to the future are smart strategy vs. taking income now and paying tax on it. In addition, there are new credits under Obamacare for things like paying for employee’s health insurance that can benefit small businesses. So, history aside, there is always tax strategy.
Happy birthday income tax! Many happy returns! (Of which the happiest return is the return that pays the legally lowest possible tax for our clients!)
Reach out to Safe Harbor LLP by email if you want to reduce your taxes!