Why Do They Tax Income

Tax Philosophies

Many countries in the world whether small, medium or large all share in taxing income. Even to this day, there are philosophies as to why we are paying income tax on our earnings. Eons ago, the first kings and queens took in food as a method of payment for paying taxes if there was no money. Food and money supplied from the farmers not only provided food for the kingdom, but helped to support the country. The basic philosophy of taxes is to tax the collectivized wealth of a community or country. Some people also theorize that to tax income may actually penalize those who work, hinder economic growth and business competition, in addition to discouraging investing and saving.

 

 

 

History

When did it became okay to tax income? It is hard to say, but land, slaves and people of wealth, high social positions and a means to produce products and money have always been taxed. Taxation may not have meant money changing hands, but paying with trade goods, labor or farm goods has always been a way of life for many cultures.

One of the earliest recorded tax income schemes occurred in 1188 in the UK. Henry ll was trying to raise funds for a crusade and began taxing lay persons in England based on moveable property and personal income. Technically, the first modern income tax began in 1799.

The United State government began to tax income in 1861. At the time, this income tax was justified to pay for the war efforts of the American Civil War. Tax income over $800 was taxed at 3 percent, however the tax was later repealed and replaced. Congress passed a new tariff in 1894 as a peacetime income tax to subsidize lost tariff reductions.

After several changes, tax income came to be permanent within the United States in 1913. With each new war and government funding, taxes have become permanent and gradually increased. The national debt for the United States grows larger every year to support more wars, government programs and a multitude of miscellaneous services, and this is why they tax income today.

Common Taxes

Other countries have their own tax systems, but in the United States we are taxed on net income. Net income can refer to business income, capital gains and wages, also called personal earnings. Individuals are basically taxed by income brackets and may pay as little as 7 percent or an average of 33 percent or more.

Unless you are self-employed, you will receive a pay check and see a list of the various taxes that have been taken out of your tax income before you ever receive your check. Self-employed individuals are expected to file state and federal taxes on earnings and pay taxes due.

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