ECONOMIC PERSPECTIVES

Fact Sheets: Taxes HISTORY OF THE U.S. TAX SYSTEM The federal, state, and local tax systems in the United States have been marked by significant changes over the years in response to changing circumstances and changes in the role of government. The types of taxes collected, their relative proportions, and the magnitudes of the revenues collected are all far different than they were 50 or 100 years ago. Some of these changes are traceable to specific historical events, such as a war or the passage of the 16th Amendment to the Constitution that granted the Congress the power to levy a tax on personal income. Other changes were more gradual, responding to changes in society, in our economy, and in the roles and responsibilities that government has taken unto itself. Colonial Times For most of our nation's history, individual taxpayers rarely had any significant contact with Federal tax authorities as most of the Federal government's tax revenues were derived from excise taxes, tar...

In the February 23, 2010 Slate article " Tax Fraud: Debunking the claim that higher income-tax rates reduce GDP ," Eliot Spitzer explains that the rich and powerful have a long history of saying that paying taxes has a devastating effect on economic output, but it is untrue.

In the January 1, 2010 National Public Radio (NPR) story " To Avoid Raising Taxes, States Try To Rack Up Fees ," Greg Allen reports that U.S. states are using numerous fees and other tax increases to reduce budget shortfalls. Few ideas are more unpopular during a recession than increasing taxes. So, how can states, counties and municipalities that are struggling financially raise more money? For many, the answer is fees. Nearly every state in the country struggled to close budget deficits in 2009, and for many the struggle is not over yet. The National Conference of State Legislatures reports that 36 states already have budget deficits for the fiscal year that began in September, and the gaps are only expected to grow as 2010 progresses. There have been a lot of cuts, and more are coming. Governors and legislatures have laid off and furloughed state employees, tapped rainy-day funds and cut spending on education and health care. They have also raised revenue — what most peopl...