Today is tax day. Although it normally falls on April 15, because of Emancipation Day, the deadline has been extended. And while filing taxes is as complicated as ever, it’s important to remember that it wasn’t always this way.
The federal government has made things so convoluted that it’s difficult to maximize your refund and file correctly on time. But in 1913, the first year of federal income tax, it was a lot simpler. It was so easy that it was almost like mailing in a postcard:
“For example, page 1 of the original IRS 1040 income tax form from 1913 appears above. There were only four pages in the original 1040 form, including: two pages of worksheets, the actual one-page 1040 form above, and only one page of instructions, view all four pages here. In contrast, just the current 1040 instructions for 2016, without any forms, runs 106 pages.
“Individual federal income tax rates started at 1% in 1913, and the maximum marginal income tax rate was only 7% on incomes above $500,000 (more than $12 million in today’s dollars). The personal exemption in 1913 was $3,000 for individuals ($72,850 in today’s dollars) and $4,000 for married couples ($97,000 in today’s dollars), meaning that very few Americans had to pay federal income tax since the average income in 1913 was only about $750. The Tax Foundation has historical federal income tax rates for every year between 1913 and 2013 here for tax brackets expressed in both nominal dollars and inflation-adjusted dollars.”
Americans spend around 6.1 billion hours every year on doing their taxes. Just think of all the productive things that could be accomplished in that time. We spend another $10 billion on accountants and tax preparation firms. Another $2 billion goes to software like TurboTax. To put that in perspective:
“The amount of time spent for income tax compliance – 6.1 billion hours – would be the equivalent of more than 3 million Americans working full-time, year-round (or 2.1% of total US payrolls of 145.9 million). By way of comparison, the federal government currently employs 2.8 million full-time workers, and Wal-Mart, the world’s largest private employer, currently employs 2.2 million workers worldwide and 1.3 million workers in the US (both full-time and part-time). At the current average hourly wage of $21.90 an hour, the dollar value of the opportunity cost associated with tax filing would be more than $131 billion, slightly more than the 2016 GDP of Washington, D.C. ($127 billion).”
Here is what the form looked like in 1913:
To learn more about how unfair and ridiculous the tax code is, check out this article.