- - Monday, April 15, 2013

Happy birthday: The income tax is now 100 years old.

In 1913, the 16th Amendment to the Constitution was ratified by three-fourths of the then-48 states.

Stop me if you have heard this one, but the federal income tax was pushed by progressives who felt the rich should pay their fair share. They promised that only really rich people would have to pay the income tax, and that tax rates would remain forever low.

The tax brackets in 1913 ranged from a low of 1 percent to a high of 7 percent. In today’s dollars, the standard family deduction was $93,000, and the top rate kicked in at $11.6 million. Today, it is easier to be rich and pay the top bracket of 39.6 percent you have to earn $450,000, less than one-twentieth of the promised top bracket for $11.6 million.


Today, the bottom rate is 10 percent higher than the top rate in 1913 and it kicks in after a standard family deduction of $12,200.

Only 358,000 Americans filed 1040s in 1913. Today, 140 million must file by April 15.

This is called trickle-down taxation. Politicians promise that their new tax will hit only “the rich.” Over time, the tax spreads out to just about everyone. The Spanish-American War brought the federal excise tax on phones at a time that only the rich few owned phones. Soon, phones were used by all Americans, and for a hundred years after the Spanish-American War was over, we were all paying the “temporary” tax on the rich few to pay for the long-finished war.

More recently, the alternative minimum tax (AMT) was invented to punish 155 Americans who avoided federal income taxes by buying municipal bonds. Today, about 4 million Americans are hit with the AMT.

The income tax has become middle class a people’s tax. President Obama was elected with the central promise that he would only raise taxes on those earning more than $250,000 a year. It took him all of 16 days to break that promise. His first tax was on tobacco: The average tobacco user earns $40,000 a year. Fat cats in Mr. Obama’s eyes. Obamacare has seven taxes targeting middle- and lower-income Americans. His 2013 budget hits the poor and middle class again and again, targeting tobacco users and energy consumers.

In a stealth tax on lower-income Americans, Mr. Obama wants to bring back “bracket creep” that under President Carter pushed Americans into higher and higher tax brackets, thanks to government-created inflation. Why was Mr. Obama printing so much new cash to cover the deficit? The coming inflation will help fill Washington’s coffers, and you and your neighbors will be shoved into higher tax brackets if he is able to pass a chained Consumer Price Index and weaken the indexation of tax brackets that President Reagan won in 1981.

As you fill out your tax returns for 2012, consider that the income tax is “only” 100 years old. The nation, founded on July 4, 1776, is now 237 years old. This strongly suggests that America functioned just fine for 137 years without any federal income tax. If John Lennon’s “Imagine” and The Beatles’ “Taxman” came together, we might imagine an American future like the first 137 years without any federal income tax.

Is that possible? Well, today there are nine states with no state income tax and 41 states with income taxes ranging from 3.1 percent (Pennsylvania) to 13.3 percent (California). Could you imagine living in states with no income tax, such as Texas, Florida, Nevada, Wyoming, Alaska, South Dakota, Washington, New Hampshire and Tennessee? Somehow, those states run well; indeed, better than, income-tax-collecting states, such as California, Illinois, Maryland, California and New York.

Indeed, some states are announcing they plan to phase out their income taxes as soon as possible: North Carolina, led by state Senate leader Phil Berger; Kansas, under the leadership of Gov. Sam Brownback; and Louisiana, led by Gov. Bobby Jindal.

Death and taxes may be unavoidable. American history shows, though, that there is nothing inevitable about income taxes. Fifty states competing to create the best government at the lowest cost show that even today, there is a strong argument for a top income-tax rate of zero.

Grover Norquist is president of Americans for Tax Reform.