For most Americans in most years, today is Tax Day, when individual income tax returns are due to the federal government.
Here are nine things you should know about federal income taxes in the United States, including how evangelicals made them possible.
1. The first national income tax was a flop.
The first national income tax in the United States was in 1861, soon after the outbreak of the Civil War. Congress approved a national income tax, signed into law by President Lincoln on August 5, 1861, which provided for a flat tax of 3 percent on annual income above the personal exemption of $800.50 (equivalent to $24,094.78 in 2021). Because so little money was collected that first year, Congress passed the Internal Revenue Act of 1862, which created the Internal Revenue Service. The tax expired soon after the war ended.
2. The second national income tax was unconstitutional.
In 1894, the Wilson-Gorman Tariff Act revived the income tax, imposing a 2 percent tax on incomes over $4,000 ($123,198.60 in 2021). The next year the Supreme Court ruled in Pollock v. Farmers’ Loan and Trust Company that the income tax provision of the act was a direct tax, and thus violated Article I of the Constitution, which said taxes had to be levied in proportion to a state’s population.
3. The third national income tax required a constitutional amendment.
In the 1890s the federal government depended primarily on tariff duties and excise taxes as its chief sources of revenue. These types of taxes are regressive (i.e., take a larger percentage of a poor person’s income), so many Americans favored replacing them with a progressive income tax, which would place more of the tax burden on the wealthy. Because of the ruling in Pollock, a constitutional amendment was needed to reinstitute a national income tax. The proposed 16th Amendment was approved by the Senate (77–0) and the House (318–14) and ratified by 42 states by 1913.
4. Supporters of the income tax in Congress argued that a progressive income tax was “the only Christian and Biblical tax.”
Evangelicals in Congress based this argument, says Joshua Cutler, on two main grounds: “first, the general claim that Christianity emphatically teaches that the wealthy must give of their wealth to care for the poor; and second, the much more specific claim that Christianity and Judaism mandate giving in proportion to ability to pay, as measured by income.”
While these criteria could have been used to promote a flat tax (i.e., the same tax rate for every taxpayer regardless of income bracket), the evangelical Congressmen also made the argument that the ability to pay increases in more than direct proportion to income. Representative Uriel Hall of Missouri provides an example of the arguments:
[I] have heard a gentleman say on this floor that no one ever heard of an income tax prior to 1842. I desire to say that that gentleman has certainly never read Moses in Deuteronomy, where he advocates collecting taxes according to the means and ability to pay. . . . He has certainly not read Saint Luke, where he declares, ‘For unto whomsoever much is given, of him shall be much required; and to whom men have committed much, of him they will ask the more.’ (p. 40)
Some of the Congressmen based their understanding on Jesus’s parable of the talents in Matthew 25, while others on Paul’s words in 1 Corinthians 16:2: “On the first day of every week, each one of you should set aside a sum of money in keeping with your income, saving it up, so that when I come no collections will have to be made.”
Representative Benton McMillin of Tennessee warned wealthy Americans that “we will require you to do what the great Redeemer of the world instructed his disciples to do: ‘As the Lord has prospered you, so give.’ That is the doctrine of the Democratic Party.”
5. Ministers are allowed to exclude a portion of their pay from taxable income.
Congress passed the Revenue Act in 1921, which exempted from the gross income of ministers the rental value of any “dwelling house and appurtenances thereof” provided by a church as part of clergy compensation. This parsonage exemption, however, applied only to ministers who lived on property owned by their church and disadvantaged ministers whose churches provided a housing allowance rather than a church-owned parsonage.
In 1954, Congress amended the tax code to allow ministers to exempt a portion of their income to the extent used by the minister for housing. According to a Senate report at the time, the purpose of this addition was to eliminate the disparity in the tax code between ministers who lived in a church-owned parsonage and those who were given a stipend with which to secure housing.
Clergy are not the only taxpayers to receive such an exemption. Congress included several categories of tax-free housing allowances to give tax breaks to classes of taxpayers who have little choice about their personal living space, such as members of the military, Peace Corps, or Foreign Service.
6. The highest income earners pay the vast majority of federal income taxes.
Households at the top of the income distribution pay the majority of federal taxes. Households in the highest income quintile, which received about 55 percent of all income, paid more than two-thirds of all federal income taxes in 2017, the last year for which data are available. In contrast, households in the lowest quintile, which received about 4 percent of all income, paid less than half of 1 percent of federal taxes in that year. (Quintiles—fifths—contain equal numbers of people.)
7. Almost half of Americans pay no income tax. They are usually the very old or very young.
Somewhere between 40 and 47 percent of Americas pay no federal income tax (though they pay other federal taxes, such as on gasoline). The likelihood of not paying federal income tax is closely correlated to age. “If you are very young or very old, you are far less likely to pay income tax than if you are working age,” says Howard Gleckman. “Only 11 percent of those age 25–55 do not pay federal income tax, while more than 80 percent of those age 75 or older are non-payers.”
8. Taxpayers can’t refuse to pay income taxes on religious or moral grounds by invoking the First Amendment.
Governments have always contended with citizens who make what are considered “frivolous tax arguments” to avoid complying with tax laws. Such arguments rarely work, but people keep trying. The IRS has a list of responses to the most common arguments. For example, some Americans claim that taxpayers may refuse to pay federal income taxes based on their religious or moral beliefs, or an objection to the use of taxes to fund certain government programs, and invoke the First Amendment in support of this position. According to the IRS:
The Law: The First Amendment to the United States Constitution provides that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.” The First Amendment, however, does not provide a right to refuse to pay income taxes on religious or moral grounds or because taxes are used to fund government programs opposed by the taxpayer. The First Amendment does not protect commercial speech or speech that aids or incites taxpayers to unlawfully refuse to pay federal income taxes, including speech that promotes abusive tax avoidance schemes.
9. Tax Day isn’t always on April 15.
In 1913,Tax Day was set for March 1. It was moved to March 15 in 1918 and to April 15 in 1955. If April 15 falls on a weekend, the deadline is moved to Monday. Tax Day sometimes conflicts with two local holidays: Emancipation Day in Washington, D.C., commemorating the emancipation of slaves in April 1862, and Patriots’ Day, in Maine and Massachusetts, which celebrates the Battles of Lexington and Concord on April 19, 1776, that initiated the American Revolutionary War. When there is a conflict with those local holidays, the deadline is moved for the entire nation. Because of the pandemic, Tax Day for 2021 has been extended to May 17.