History of TaxES
We have compiled the list of
questions below based on inquiries that we
receive. This information is generic in
nature regarding tax policy questions and is
intended
to serve as tax advice. We also cannot
provide up-to-date information on any
Administration or Congressional proposals
that may affect the information shown herein.
Any questions regarding specific tax
situations or for help in filling out your
tax return should be directed to your
attorney, accountant or other tax
professional, or to the Internal
Revenue Service. The IRS will not
comment, though, on the legislative merits of
current tax law, or on pending Congressional
action that may change the tax code. Finally,
we make every effort to make certain that the
information contained here is accurate, but
due to the fluid nature of the legislative
process, changes in tax laws may occur that
are not reflected here at the time of
publication. To the best of our knowledge,
this information is accurate.
Why do we need to pay taxes?
How did our tax system evolve?
I want to know about the
origin of the Federal estate tax. Can you
tell me when it became part of the tax code
and the rationale behind it?
Oliver Wendell Holmes, former
Justice of the United States Supreme Court,
once said, "Taxes are what we pay for a
civilized society." Although people work hard
to meet their needs and the needs of their
families, there are some things they cannot
purchase themselves. For example, the taxes
paid to state and local jurisdictions help
pay for police and fire protection. These
taxes also pay for the operation of the local
governments, and for local recreation areas
such as parks and other public
facilities.
On the national level, Federal income
taxes help pay for defense for the country.
They also pay for capital facilities such as
highways and other transportation services,
and for help for those who are poor or ill.
These are all services that individual
citizens cannot purchase the way they can buy
food and clothing and the other necessities
of life. When people live together in a
society, all of its citizens must bear the
cost of providing such services. Taxes are
the means by which the society raises the
money to cover these public costs.
We have created a series of fact sheets
that were excerpted from an Internal Revenue
Service publication.
Economics of Taxation explains how taxes
support government services and benefit our
citizens. Writing
and Enacting Tax Legislation explains the
process for developing and passing
legislation into law. We have other
information available off-line that we will
gladly mail to you upon request. These will
help you to understand our Federal tax
system, along with taxes imposed by
State and local jurisdictions. We believe
this information will provide you with a
better understanding of the various taxes
imposed in the United States.
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In 1916 Congress for the first time
levied a tax upon the transfer of a
decedent's net estate. The Committee on Ways
and Means of the U.S. House of
Representatives explained that a new type of
tax was needed, because the "consumption
taxes" in effect at that time bore most
heavily upon those least able to pay them.
The Committee further explained that the
revenue system should be more evenly and
equitably balanced and "a larger portion of
our necessary revenues collected from the
incomes and inheritances of those deriving
the most benefit and protection from the
Government."
The Committee recommended an estate tax
rather than an inheritance tax because many
states already imposed inheritance taxes. It
felt that the estate tax helped to form a
well-balanced system of inheritance taxation
between the Federal Government and the
various states and that an estate tax could
be readily administered with less conflict
than a tax based upon inherited shares.
Various changes in the estate tax provisions of law, as well
as their repeal, have been proposed over the years, but the
principle has been retained. Our office has available an excerpt
from the Ways and Means Committee's report on the . The report reproduces
a June 19,
1935, message from
President Roosevelt to Congress advocating an inheritance
tax, in addition to the estate tax. Although the inheritance
tax proposal was not adopted, the message provides information
on why the taxation of individuals' estates was considered
appropriate.
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