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Seven Presidents who Shaped Taxes02.14.14

It’s President’s Day and we have so much to thank all of our Presidents for. They’ve made choices – some popular, some not so much – that have protected our nation, created opportunity for our citizens and provided services that we rely on every day.

The taxes we pay make it all possible. But did you ever wonder how the collection of income tax all got started? It goes back to the Civil War. Here’s a quick look at some important events on the tax timeline and the presidents who oversaw them:

  • Abraham Lincoln: In 1861, the Union needed to find a way to fund the Civil War. While the original was never put into effect, one year later Abraham Lincoln signed a bill that imposed a 3 percent tax on incomes between $600 and $10,000 and a 5 percent tax on higher incomes. The rate was increased the following year. This bill was repealed in 1872 and declared to be unconstitutional.
  • Woodrow Wilson: In 1913, Woodrow Wilson saw the 16th Amendment come to pass, once again giving Congress the authority to enact an income tax. That same year, the first Form 1040 appeared and Congress levied a 1 percent tax on net personal incomes above $3,000 with a 6 percent surtax on incomes of more than $500,000.

    In 1918 while President Wilson was still in office, the top income tax rate increased to 77 percent to help finance the war effort during the “The Great War”.
  • Franklin Delano Roosevelt: Under FDR, the income tax was expanded to include more Americans and increase taxes.  To help taxpayers reduce taxes, the medical and investment expenses deductions were approved in 1942. 

    Then in 1943 employer income tax withholding was instituted so taxpayers could prepay their taxes. In 1944 when the standard deduction was approved by Congress.
  • Harry Truman: In the 50s, President Harry Truman began a reorganization of the Bureau of Internal Revenue to replace a patronage system with career, professional employees and to restore public confidence in the agency. Its name was changed to the Internal Revenue Service.
  • Dwight Eisenhower: Eisenhower continued Truman’s reorganization of the IRS and was also responsible for changing the due date for individual income taxes to the current date of April 15th.
  • Ronald Reagan: Reagan’s term in office saw the start of electronic filing, or e-file, beginning in 1986. This computerized platform, actually started decades earlier under President Lyndon Johnson, has completely transformed the way Americans file their taxes..
  • Bill Clinton: Clinton oversaw the IRS Restructuring and Reform Act of 1998 which prompted the most comprehensive reorganization and modernization of IRS in nearly half a century. The IRS reorganized itself to closely resemble the private sector model of organizing around customers with similar needs. 

Presidents may come and go and leave their own legacy in the tax system, but taxes will always be one of the key ways Americans contribute to all our country does. So we say hail to the chief!