50 Interesting Fun Facts to Lighten Up Tax Time
Governments have imposed taxes for thousands of years. There are recordings of tax payments made in ancient Mesopotamia circa 2500 B.C. At the time, people who didn't have money to pay taxes often had to pay with livestock, food, or labor.
America’s tax laws have been in flux for generations and remain so to this day. The first income tax in the United States came about with the Revenue Act of 1861. A flat 3 percent tax on income above $800 was used to fund the Civil War and repealed 11 years later. In 1894, a new flat federal income tax was ruled unconstitutional by the U.S. Supreme Court. It was not until the 16th Amendment was ratified in 1913 that the federal income tax finally stuck for good.
Federal tax returns were not always due April 15. In 1913, March 1 was the big day; in 1918 it was moved to March 15; and finally in 1954 the current Tax Day was established. This year, April 15 falls on a Sunday and a public holiday in Washington, D.C., (Emancipation Day) falls on April 16, moving the tax deadline to April 17.
In the 1940s, the government needed a steady flow of cash to fund the war effort. It passed the Current Tax Payment Act of 1943, which required that companies withhold income taxes from employees' paychecks and make ongoing payments on employees' behalf. Before this (from 1916 to 1943), Americans paid income taxes quarterly or annually.
Before World War II, few individuals or families owed income taxes. Due to a high personal exemption, only 1.1 percent of working-age people filed a return, according to the Tax Foundation, and about 17 percent of those filers did not have to pay income taxes.
The instructions for the basic 1040 tax return form are more than 100 pages long. The instructions for the 1040EZ, the version used for the most basic tax returns, are more than 40 pages long.
Even Albert Einstein found taxes inscrutable. He once said, "The hardest thing in the world to understand is the income tax" (that is, according Leo Mattersdorf, the math genius' tax preparer).
According to the IRS, the average time it takes to complete a Form 1040 is 16 hours; a 1040A takes seven hours; and a 1040EZ takes five hours. Overall, the average is 13 hours. In 2017, the IRS processed 151.9 million individual tax returns, equivalent to about 82.3 million days' worth of prep time.
Aside from the nation of Eritrea in Africa, the United States is the only country that requires citizens to pay taxes on their income if they work and live outside the country. Some wealthy individuals have renounced their citizenship and moved to another country to avoid paying taxes.
Americans collectively had to work until April 23 last year -- 112 days -- to pay the country's tax burden, according to the Tax Foundation, which has declared that date Tax Freedom Day. On a state-by-state basis, Connecticut residents had to work the longest, until May 21. Residents of Mississippi had the earliest Tax Freedom Day, April 5.
Collectively Americans paid $5.1 trillion in federal, state, and local taxes last year -- more than the combined cost of food, clothing, and housing, according to the Tax Foundation.
While there's no dodging a federal bill, seven states do not have an income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. New Hampshire and Tennessee tax only dividends and interest income.
States that don't have an income tax get their revenue from other sources, such as sales or property taxes. In some cases, this actually places a higher tax burden on lower- and middle-income families. They could wind up paying a larger portion of their income to the state than high-income families.
Between the standard deduction ($6,350) and personal exemption ($4,050), most single filers don't pay federal tax on the first $10,400 they earned in 2017. Single taxpayers who earned more than $261,500 don't qualify for the full exemption.
Some people believe that moving into a higher tax bracket will net them less money in the end. But the United States uses marginal tax brackets, meaning the higher rate applies only to the earnings that fall within the higher bracket. If only a single dollar bumps a taxpayer into a higher bracket, only that one dollar is taxed at the marginal rate for that bracket.
To illustrate the difference between the marginal tax rate for people in a particular bracket vs. their effective tax rate -- the average rate they actually pay -- the Center on Budget and Policy Priorities once estimated the tax burden for a family of four with income of $110,000. Although the family fell into the 25 percent bracket, after accounting for standard deductions and credits and the progressive tax system in the U.S., their effective income tax rate was only 9 percent.
According to the Tax Policy Center, the top 1 percent of earners in the United States paid 38 percent of all federal income taxes in 2017, down from 42.4 percent in 2016. The top 0.1 percent paid 18.9 percent, down from 20.8 percent in 2016.
All winners of more than $5,000 in a lottery are subject to a 25 percent federal withholding tax, but state withholding taxes vary. In some states, such as California and Delaware, the withholding rate is zero. In Maryland, the withholding rate is 8.75 percent for residents and 7.5 percent for non-residents. And that's just what the states take immediately; the winner may be required to pay additional taxes when filing a return.
Today, the highest marginal income tax bracket is 39.6 percent, but it has been much higher. The Individual Income Tax Act of 1944 raised tax rates to the point where the highest bracket was 94 percent.
A few months after the attack on Pearl Harbor, President Franklin D. Roosevelt proposed a 100 percent income tax. In a letter to Congress, he wrote that in this time of "grave national danger ... no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000 a year" (equivalent to about $419,370 today).
Astronaut Jack Swigert, the command module pilot for Apollo 13, got the assignment at the last minute because of health concerns surrounding another astronaut. In the rush, Swigert neglected to file his taxes. According to the transcript of the moment he realized his mistake, the crew on the ground thought he was joking, but Swigert was seriously asking how to file an extension.
While some people claim unintentional mishap when the IRS audits them, others have made it a point not to pay taxes. Common arguments or tactics include claiming that the 16th Amendment was not properly ratified, that filing violates Fifth Amendment rights, or that the taxpayer has taken a religious vow of poverty. Others believe they can form a trust to hide taxable income. The IRS says it will help taxpayers who were misled to believe such myths.
Even celebrities and business tycoons run into problems when they don't pay their taxes. Pamela Anderson once had a $1.7 million lien against her for unpaid taxes. Duane Chapman, also known as Dog the Bounty Hunter, has owed up to $2 million in unpaid taxes at a time. Perhaps the best-known celebrity tax dodger is Wesley Snipes, who spent three years in prison and continued to battle the IRS afterward.
Even money earned illegally is subject to tax. Some states require drug dealers to pay taxes on the drugs they sell. The tax may be due as soon as the drug is in their possession, meaning someone caught with drugs may have to pay a fine for unpaid taxes on top of punishment for their other crimes. To pay the tax anonymously, dealers can buy tax stamps and affix them to containers of controlled substances.
Violent Chicago mobster Al Capone famously got caught on tax evasion charges. Other mobsters, including Al's brother Ralph "Bottles" Capone, Frank Nitti, and Jake "Greasy Thumb" Guzik, were also charged. Among his debts to society, Al Capone had to pay $215,000 plus interest in back taxes.
An IRS rule change in 1987 required taxpayers to list dependents' Social Security numbers for the first time. As a result, about 7 million children -- a tenth of all dependent children in the country at the time -- "disappeared."
Delaware has a low 8.7 percent flat tax on corporations, likely the reason about half of all publicly traded companies in the country consider it home. A single address in Wilmington, 1209 North Orange St., is the legal address of more than 285,000 companies.
The top marginal corporate tax rate in the United States (38.92 percent) was previously the fourth-highest in the world, exceeded by Puerto Rico (39 percent), Comoros (50 percent), and the United Arab Emirates (55 percent). But that will change. The recent Tax Cuts and Jobs Act slashed the corporate tax rate to 21 percent, a little below the worldwide average of nearly 23 percent.
In spite of their size and the corporate tax rate, some large corporations have an effective federal income tax rate of zero, or even negative. In the past few years, non-payers have included General Motors, telecom provider Level 3 Communications, and the airline United Continental.
Observations and complaints about unfair tax payments go back to at least the ancient Greeks. Plato once said, "Where there is an income tax, the just man will pay more and the unjust less on the same amount of income."
Madison Square Garden, the iconic New York sports, music, and entertainment venue, has not had to pay property taxes since 1982. The arrangement was supposed to end after 10 years, according to then-mayor Edward Koch, but due to the disputed wording of the agreement, it remains in perpetuity. The break cost New York City over $48 million in 2016 alone.
Several states, primarily in the southeastern part of the country, have annual sales tax holidays. Depending on the state and date, clothing, footwear, guns, school supplies, energy-efficient appliances, and other select items are exempt from sales tax for two to three days a year.
Fortunetellers, astrologers, and witches were added to Romania's labor code in 2011, meaning they have to pay income tax and contribute to the country's social programs. Some witches cast curses on the government in response -- although others felt it legitimized their work.
Ireland exempts up to 50,000 euros in profits from the sale of qualified artistic work from income taxes. Grants, awards, and prizes may also be tax exempt if they are related to the artist's work.
Some states offer residents very odd or specific tax credits or deductions. In Alaska, eligible whaling captains can deduct up to $10,000 for whaling-related expenses. In Hawaii, property owners may be able to deduct up to $3,000 in expenses related to maintaining a tree with historic or cultural value.
What is the real difference between a Kit Kat and a 3 Musketeers? The former contains flour in its wafers, an ingredient that leads some states to label the Kit Kat a grocery item rather than candy. As a result, retailers may have to charge different taxes on the bars.
Some states apply sales tax to children's diapers because they are considered clothing. The same tax does not apply to adult diapers.
Feminine hygiene products are a necessity for many women, yet most states impose a sales tax on their sale while exempting other necessities, including groceries and medication. There are growing international and domestic movements to end the tax.
Taxes on products or services that are considered harmful are referred to as sin taxes. Some examples include taxes on alcohol, tobacco, gambling, and even fast food. One example of a sin tax is Utah's 10 percent tax on businesses that have nude or partially nude workers -- in other words, strip clubs. The extra tax extends to drinks and food sold on the premises.
Beards are back in vogue, but there were times when having a beard was costly. During the 16th century, King Henry VIII imposed a tax on beards that increased with the wearer's social status. Eventually the tax was dropped, but his daughter, Queen Elizabeth I, reintroduced a beard tax on anyone with more than two weeks' worth of growth. In Russia, Peter the Great wanted to Westernize the country and required every man, except peasants and clergy, to buy a "beard token" to prove they had paid up. The tax lasted from 1698 to 1772.
Talk about taxes' ability to darken a day -- in 1696, a window tax was introduced in England and Wales. It was assessed as a flat property tax plus a tax based on the number of windows a home had. As a result, some people bricked up their windows and new buildings sometimes were designed with fewer windows. Scotland and France imposed similar taxes in the 1700s.
In Roman times, urine and the ammonia within it were collected for uses such as tanning and laundering. Emperor Vespasian imposed a tax on the buyers of urine from public urinals. Today words for "urinal" in French, Italian, and Romanian are derived from the emperor's name.
From 1784 to 1811, the British government taxed hats based on price. A stamp was pasted inside the hat, and anyone caught with a stamp-less hat had to pay a fine. At least one stamp forger was sentenced to the harshest penalty: death.
In England, residents must pay a license (or, ahem, licence) fee for each TV in their homes. The money from this annual fee goes toward funding the BBC. The cost is 147 pounds for a color TV and 49.50 pounds for a black-and-white TV. The blind pay half as much.
U.S. car buyers pay sales tax, and there are fees for registering a vehicle, but they don't come close to what Danish car buyers pay. Depending on the price of the car, the registration tax can be 150 percent of the sale price.
As Benjamin Franklin said, "In this world nothing can be said to be certain, except death and taxes." Although he's often credited with the idea, that line comes from a 1789 letter, and similar quotes date to 1716 and 1724.