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Historical Perspectives on the Federal Income Tax

Broadening of the taxpayer base
    “The plan adopted in this bill is this:  We are going to change the definition of “taxpayer”.  Everybody is going to be a taxpayer who has a net income of $500 or more.   It makes no difference how old one is or where he is or what his circumstances are….He has been elevated to the dignified role of a taxpayer.” Congressional Record Volume 90 (1944), House- May 8, page3982 Congressman Jenkins of Colorado
76th Congress, 3d Session, House of Representatives, Report No. 2491, June 10, 1940. Congressman Doughton, Chairman of the Committee on Ways and Means. (H.R. 10039)
“Summary of Changes in Tax Structure”, Title 1, “Permanent Changes” (3)
    “The requirements as to filing income-tax returns in the case of individuals has been changed.   Under the existing law, an individual is required to file a return if his net income amounts to $1,000 or more in the case of a single person, or $2,500 or more in the case of a married person, and in either case if his gross income is $5,000 or more.  The bill requires a return from a single person if his gross income is $800 or more and from a married person if either their aggregate or separate gross income is $2,000 or more.”

 “Discussion of Principal Income Tax Changes”, (a) “Lowering of personal exemption
     “Title 1 of the bill lowers the personal exemption from $1,000 to $800 in the case of single persons and from $2,500 to $2,000 in the case of married persons or heads of families.  This will make approximately 2,190,000 new taxpayers.
(d) “Requirement for filing individual income tax returns”.  Under existing law, an individual, if single, is not required to file an income-tax return unless his gross income is $5,000 or more or his net income is $1,000 or more….The bill requires a return from a single individual if his gross income is $800 or more and from a married individual if (1) such individual has a gross income of $2,000 or more….Many persons have failed to file returns upon the assumption that their income was insufficient, when, in fact, they were liable for the filing of a return and payment of a tax.  This change will require approximately 8,000,000 additional returns, and it is believed will result in the collection of substantial additional taxes.  It is estimated that under existing law approximately 7,5000,000 individual returns are filed.” (This requirement doubled the number of persons subject to the income tax)

Congressional Record-Senate Volume 88, October 6, 1942, page 7797.  Senator George of Georgia, Chairman of the Senate Finance Committee
     “The bill further broadens the individual income-tax base by reducing the personal exemption for a married persons, or head of a family, from $1,500 to $1,200, and in the case of a single person from $750 to $500….It is estimated that the reduction in personal exemptions will add approximately 7,000,000 new taxpayers….The bill levies a victory tax of 5 percent on all income in excess of $624 received during the year by individuals from salaries, wages, and other compensation for personal services, dividends, interest, annuities and net profit from business or profession….It is estimated that this tax will add an additional eighteen and one-half million taxpayers, who otherwise would pay no tax directly to the Federal Government.  Without the victory tax, it is estimated, there will be twenty-seven and one-half million taxpayers.  Thus, under the regular income tax and the victory tax there will be a total of 46,000,000 taxpayers.”

 Congressional Record-House Volume 88, July 16, 1942, page 6254.  Congressman Halleck of Indiana
     “The gentleman, who has made a splendid statement, referred to the fact that this bill would affect 30,000,000 taxpayers.  I take it the gentleman refers to the direct effect upon the taxpayers in the number of 30,000,000, because, as I view it, this tax bill, if passes, will directly and indirectly affect every man, woman, and child in this country.”

Congressional Record-House Volume 88, July 17,1942, page 6348.  Congressman Whittington of Mississippi
     “Additional sources of revenue must be utilized.  Congress should take the lead.  All citizens should participate in the burdens of taxation.  The tax base should be broadened as provided in the bill.  Every citizen should have a stake in the Republic.”

Congressional Record-House Volume 90, May 3, 1944, page 3979, Congressman Jenkins of Ohio:
     “There is another reason why on the 15th of March last or about the 15th of March there was so much unrest in the country.  That was due to the fact that we had put into effect the withholding tax.  The withholding tax made millions of taxpayers who had never been taxpayers before….Up to that time many people escaped taxation, not willfully, maliciously, and illegally, but the tax structure was such that they were not brought within the preview of the law….
     ….Not only our experts and the Treasury experts but other experts outside say that if we do that we are going to relieve from taxation 11 or 12 million people who are now paying taxes and who are making no strenuous objections to it.”

Congressional Record-House Volume 90, May 4, 1944, page 4016, Congressman McLean of New Jersey:
     “So the Committee on Ways and Means proceeded to ‘provide simplification without substantially changing the number of taxpayers or the revenue yield under the existing law.’…The yield from every recent enactment has been far in excess of the estimates.  This is particularly true under the pay-as-you-go withholding plan….
     …This estimate covers only 41,000,000 taxpayers and does not include some additional amount that will be received from 11,000,000 Victory-tax payers with incomes above $500 who will be covered into the new system….Page 4017
Whenever a manipulation with rates in a tax bill begins with lowering exemptions and increasing rates it is fair to assume that an increase in yield is being planned…”

    “The Victory Tax will greatly increase the number of persons who will pay a direct tax to the Government- a direct contribution to the war effort.  It is estimated that under the regular income tax there will be 27,500,000 taxpayers, and with the Victory Tax there will be approximately 46,000,000 taxpayers.” Congressional Record Volume 88 (1942), House- October 20, page 8468, Congressman Doughton of North Carolina, Chairman of the House Ways and Means Committee.

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