Raleigh NC Accountant

W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

So, what went wrong with taxes in the US?

US tax makers have been collecting what they have been sowing for quite a while. Our honor system has been replaced by a system in which all taxpayers are under surveillance because of the heavy inclination of evading their taxes. Basically, compulsion has replaced consent. Honor has been replaced with espionage. If you’re feeling the pressure with today’s taxes, call a Cary NC CPA for all your tax-related needs!

In the mid-20th century, there was not a bank in the US that informed the IRS about customer affairs, interest was not reported, withdrawals of money weren’t reported, and not a thing that went through any account was photographed. In addition to this, real estate transactions were not reported, stock transactions weren’t reported, dividends weren’t reported, income from other sources (Form 1099) was not reported, and US Customs did not require a declaration of the amount of money carried. Go here if you want help from a modern-day Tax Preparation in Cary, NC.

It was an honor system, and it functioned quite well. The deterioration that happened over the previous fifty years to now is that everything of any fiscal significance is now reported.

Adam Smith stated that taxes will be evaded and tax laws shown little credence when there is a general suspicion of a lot of unnecessary expense and great misapplication of the public revenue. For example, $500 toliet seats, high-dollar grants to study the sex lives of ants, etc.

Because the government wanted to catch a few tax resisters and evaders in the 1950s Congress made a tax abomination of the US tax system that more and more taxpayers try to bypass. As a general rule, widespread tax evasion is a sure sign that a government’s tax system isn’t working. Citizens will pay taxes, even income taxes, if the rates are reasonable.

Thanks for reading! Stay tuned for more updates!

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Raleigh NC Tax Preparation

W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

1861 – After Lincoln was elected, southerners walk out on Congress and form the Confederate States of America with a rewritten constitution to keep the new government power to tax in check.

1862 – The beginning of US income tax is created to help finance the rising massive debts of the Civil War. If you are feeling the pressure with today’s taxes, call a CPA for Tax Preparation in Raleigh, NC for all your tax-related needs!

1872 – The income tax gets struck down.

1894 – Congress creates an income tax in response to complaints that large reliance on tariffs skyrockets the costs of imports for farmers and consumers. Go here if you want help from a modern-day CPA firm in Raleigh, NC.

1895 – The US Supreme Court holds that the 1894 income tax law conflicts with the US Constitution’s bars on insituting direct taxes.

1913 – Ratification of the sixteenth Amendment removes that bar and Congress establishes an income tax system.

1917 – World War I revenue requirements push up taxes, with the maximum rate jumping to seventy-seven percent in 1918.

1924 – Publication of the names of taxpayers and how much they owe fails to achieve the task of forcing paying the taxes and the practice is dropped.

1942 – Before World War II, the income threshold for filing income tax left most working people out. But the war’s cost pushed the threshold down the income ladder and sent the top rate to 94% prior to the war being over.

1943 – To force compliance from the hugely increased number of taxpayers, Congress institutes tax withholding from wages, which basically turned employers into tax collectors.

In the 1940s Justice Jackson of the Supreme Court, former chief counsel to the IRS, gloated about how honest Americans were in reporting their income taxes. It was an honor system – there were very few informational returns. Open resistors to the taxes were few and the black market was relatively small.

1962 – IRS Commissioner Caplin stated “no other nation in the world has ever equaled this record of voluntary compliance. It is a tribute to our people, their tradition of honesty, and their high sense of responsibility in supporting our government.”

1982 – Chief Justice Neely said – “cheating on federal and state income tax is all pervasive in all classes of society; except among the compulsively honest, cheating usually occurs in direct proportion to opportunity.”

Stay tuned for Part 3 of the Timeline of US Tax Policy!

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Raleigh NC Tax Preparation

W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

Between 1868 to 1913, about 90% of the national government’s revenue was gotten from tax on whiskey and tobacco. While the Civil War was going on the government instituted a short income tax, but it was not until 1913 when the sixteenth Amendment was passed and enabled Congress to tax incomes “from whatever sources attained.” The initial 1040’s were due on March 1, 1914. There wasn’t any money withheld from paychecks and no money was sent away with the return. Every taxpayer’s computations were calculated by IRS field agents and a bill sent to the taxpayer on June 1st.

1766 – Leaders of the colonies got together to protest British taxes under the Stamp Act. This Stamp Act Congress, which it was called, was the beginning of the American independence movement and the beginning of the modern U.S.

1782 – The first Congress under the Articles of Confederation formed. This Congress did not have any powers of taxation.

1789 – America granted a newly formed Congress the ability to tax. Without taxing powers, the initial Congress of the United States scantly survived 7 years before being dubbed a failed attempt; the 2nd Congress, with taxation powers, is still functioning after more than two hundred years. If you are feeling the pressure with today’s taxes, call a CPA for Tax Preparation in Raleigh, NC for all your tax-related needs!

1792 – Alexander Hamilton persuades Congress to pass an excise tax on whiskey to raise revenue and curb drinking. In the western frontier whiskey was the basic mode of exchange, and the 25% tax was harsh. By 1794 the region was openly in revolt. The forerunner of the IRS was created to enforce the tax. Go here if you want help from a modern-day CPA firm in Raleigh, NC.

1832 – The national debt that remained after the Revolutionary War and the War of 1812 is paid off. The South does not see any reason for continued high import taxes that increase the price on goods for Southern consumers and promote industrial monopolies in the North.

1850 – John C. Calhoun of South Carolina warns Congress that the South could leave the Union due to the fact that the overly oppressive taxation in the South raised funds that ended up in the North, causing a massive shift in money from the South to the North.

Stay tuned for Parts 2 and 3 of the Timeline of US Tax Policy!

http://www.marccpa.com/

Raleigh NC CPA

W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

“Slavery – the one cause of the Civil War.” – John Stuart Mill, 1862

Could there be any doubt concerning it? Of course the American Civil War was about the slavery issue… was it not? Well actually, one of the most hoaxes in American history is that the Civil War was started because of slavery and that Lincoln, the Great Emancipator, started a bloody struggle to break the chains of bondage that enslaved over three million black Americans. Right before the war, the South had everything it could have wanted.

In 1860, the South held the Supreme Court and Lincoln and Congress were approving a constitutional amendment to keep slavery for all time! What happened?

We should move the time back to the year 1832. By that year the national debt from the War of 1812 had been paid and Southerners saw no need to keep up the exorbitant import taxes which appeared to only raise prices for the South’s consumers. Either the South paid high import taxes on foreign goods or it purchased Northern manufactured goods at excessive prices. Either way, the South’s money transferred to the North. To say the South was not content with this arrangement would be an understatement. If you’re feeling the pressure with today’s taxes, call a CPA for Tax Preparation in Raleigh, NC for all your tax-related needs!

Consequently, in 1832 a convention was held in South Carolina to nullify these federal import taxes. The convention decided the tax was unconstitutional and authorized the governor to defy the enforcement of these taxes instituted by the national government. It looked like a civil war was in the making. Mild tempers prevailed, however, and the Great Compromise of 1833 reduced import taxes over the next few years to levels the South would tolerate. Go here if you want help with a modern-day Tax Return in Raleigh, NC.

Over the next few years, however, Northern corporate and manufacturing interests bullied into Congress more taxes that again oppressed Southern planters and made Northern manufacturers become rich. In 1850, John C. Calhoun, the South’s most exceptional spokesman, delivered a speech to Congress. It listed 3 grievances of the South that may cause secession from the Union and war. The first two had to do with fears concerning the erosion of power of the South in general and the states as well.

The third, and only concrete grievance, concerned taxation. In Calhoun’s view, national import taxes was a targeted legislation against the South. Heavy taxation on the South created funds that were used in the North. The focus of economic life in the United States was steadily changing heavily to the North. Calhoun threatened secession if the taxes weren’t reduced. But what about the slavery issue? Well, during his campaign for the presidency in 1860, Lincoln repeatedly said he wouldn’t do anything about slavery in the South. Truly, most Northerners didn’t really care about black men in bondage, just as little as how much they worried about the Indian in the West or impoverished illiterate workers in factories. By and large many black slaves got substantially better quality treatment and more compassion than their counterparts in the North. Lincoln, in fact, assured Southern slave-owners that run-away slaves would be caught. The Congress and then the Supreme Court (Dred Scott decision) continually acknowledged that slavery was here to stay.

But, just as Lincoln was elected and Congress came together in 1861, they created new high import tariffs. Slavery was not an problem – higher import taxes were. In his inaugural address Lincoln said he would collect the customs in the South even if there was a secession!

Fort Sumter, near the beginning of the Charleston Harbor, began filling with federal troops to enforce the collection of the new taxes. The Civil War started in 1861 when South Carolinians shot at the federal garrison at Fort Sumter. The inevitable had been brewing for decades – but it wasn’t about slavery. It was over tax policy.

Two years after that, Lincoln issued the Emancipation Proclamation, and then only following repeated military defeats, as the last resort to rally the North to a noble cause. To address the slave issue – most the North cared little about black people in bondage, any more than they cared about Indians to the west and the poor uneducated workers in the factories. For the most part, many black slaves received better treatment and more compassion than their impoverished counterparts in the North.

That’s it for the History of Taxes Series!

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W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

Ah…. finally a historical event clearly concerning oppressive taxation. Was the Boston Tea Party a protest concerning the British taxation on tea, as we were all taught? No, not one bit. The colonies had already been boycotting English tea for 5 years prior to the Boston Tea Party! They had actually smuggled in Dutch tea and were doing quite well. There was tea for anyone who wanted it and no British tea tax paid. Naturally, the British did not like the boycott. So, the British bypassed the duties at home. The Parliament allowed British tea sellers to disregard the import tax of shipping the tea to England and then transfer the money saved along to the colonies as they sent the tea over and then sold British tea at a price that was lower than the smuggled Dutch tea. If you are feeling the pressure with today’s taxes, call a CPA for Tax Preparation in Raleigh, NC for all your tax-related needs!

But what people would sell this British tea?

They sold it with the loyal British merchants in the colonies. But would the colonists buy the cheaper British tea even though it included a tax? Yes. So much so that what ended up happening was loyal British merchants got all the business and the taxes were still being paid to England. Obviously the colonists did not care about the tax very much; they ended up receiving cheaper tea. BUT, the non-British MERCHANTS didn’t enjoy this gig. The British merchants, with the assistance of England, had basically created a monopoly on tea sales. The native merchants feared it was only a matter of time before more British enterprises would be created with an identical mechanism and they would be forced out of business. Go here if you want help with a modern-day Tax Return in Raleigh, NC.

So, a group of MERCHANTS dressed up as Natives, walked on a ship loaded with British tea and dumped it into the harbor. Was this a shining peak in American tax protest? Not at all. The Boston Tea Party was looked at as the senseless destruction of private property at a time when private property was viewed as very important. This event was extremely grave and did not sit well with the colonists. Ben Franklin was abhorred and demanded that complete restitution would be paid at once to the owners of the tea. Anyway, it turned into war.

However, the colonists would quickly learn that fleets of warships, battalions of soldiers, and cannons were a lot more terrifying than a few tax collectors. The ironic thing is, America won the war, primarily due to the fact that England found it too expensive to fund war so far from home. BUT after the war, America faced astounding debts and taxes, and even with representation they were enormous.

Keep an eye out for W. Marc Gilfillan’s next chapter in his History of Taxes series: Taxes and Slavery and the Civil War.

http://www.marccpa.com/

Raleigh NC CPA

W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

No modern revolution that was more deeply rooted in tax problems. Tax issues not only caused it, but helped unify the disorganized and disagreeing colonies. However, maybe not precisely the way you think. If you are feeling the pressure with today’s taxes, call a CPA for Tax Preparation in Raleigh, NC for all your tax-related needs!

First, the British taxation on the colonies were neither not fair nor oppressing on the people. In fact, Americans had it great: we had the help of Britain, our land was rich, business was good, and there were jobs for everyone. Europe’s social castes didn’t limit the citizens and our sons were not forced to fight in wars in far-off places… we had it good. So what happened? Well, some missteps and misstatements by both sides. Go here if you want help with a modern-day Tax Return in Raleigh, NC.

“Taxation without representation” was indeed a problem. The problem was, nobody quite knew what to do about it (after the American revolution, other colonies such as Canada and Australia found adequately achievable solutions). But at the time there wasn’t agreement by the British parliament or American leaders on what could be done to avoid “taxation without representation”. Ben Franklin, unknowingly I presume, complicated the issue. He went over to England as our liaison and told the British that internal taxes were unacceptable but external taxes were OK.

By internal taxes, Franklin meant the paper tax and any other taxes that were paid on transactions in the actual colonies themselves. External taxes, by the colonists’ definition, were those such as import taxes that were placed upon transactions that only in part took place in the colonies. The colonists thought import taxes were external to the colonies. Yes, if you are puzzled about this, you ought to be. It makes little sense. No one caught on to the connection between import/export taxes and the ultimate prices paid for the products. In other words, import/export taxes worked against the “other guy” so they were OK.

OK, said the British parliament. if that’s what you want we’ll play along and give you whatever it takes to make you happy. So, the British created new tariffs, import and export taxes. Then, Americans decided they made a mistake. They saw the flaw of their logic… however, it was too late and the situation worsened.

Keep an eye out for W. Marc Gilfillan’s next chapter in his History of Taxes series: Taxes and the Boston Tea Party.

http://www.marccpa.com/

W. Marc Gilfillan

W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

Now that we’re moving away from the Greeks, we finally come to the Romans. Historians often speak of Roman tax policy as “more or less organized robbery” and Roman tax collectors as “a bunch of robbers.” But Roman tax law wasn’t always bad. There was a two hundred year period at the zenith of the Roman Empire when taxes were moderate. Actually, all kinds of taxes, as well as no taxation, characterized the Roman period. Taxes were as necessary yet as unpredictable in the Roman story as were the legions, the Senate and the Caesars. The half-mad emperor Nero once offered to get rid of every indirect tax and create an “amazing present to the human race.” If you are feeling the pressure with today’s taxes, call a Tax Preparer in Durham, NC for all your tax-related needs!

The Roman Republic – The Early Years

The early Roman Republic did not require much taxation because it operated with free labor. The military, which is arguably the greatest expense in every society, was a citizen’s military, comprised of property owners who served for one year without pay. They even provided their own uniforms and equipment. This level of volunteer free public service extended to most government offices. Even the judges worked for the city without pay. It is difficult to understand the validity of this ancient practice, especially in our age, where no one seems to want to raise a finger for the government without a fat paycheck. Go here if you want help with modern-day Tax Preparation in Cary, NC.

The ideal method in reducing heavy taxation is to instil in all citizens a spirit of unselfish service for the public good. It is not necessary to limit public programs and services; what is needed is the curtailment of the spirit of gain and profit that infests public figures and contractors.

The Romans, similar to many ancient civilizations, used the important men of their society to handle tax law. Taxpayers loved and admired these men, and no doubt the integrity of these powerful men rubbed off on the taxpayers. In contrast, modern tax systems use professional public relations officers to manipulate taxpayers with advertising techniques that utilize fear more than integrity. Trouble began, however, when Roman armies lived off of the populace and collected tribute in block form called “stipendium”.

Keep an eye out for W. Marc Gilfillan’s next chapter in his History of Taxes series: Taxes and the American Revolution.

http://www.marccpa.com/

W. Marc Gilfillan

W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

The city of Rhodes: a gateway to Rome and Greece. All shipped goods from the east stopped for supplies or to change cargo at Rhodes. The harbor at the island, similar to all other harbors, had a tax on everything, which was two percent. Rhodes prospered and was fabulously wealthy in the banking and commerce industry especially. The businessmen funded the creation of a 100-foot-tall bronze colossus of Apollo near the entrance to the harbor. It became known to us as one of the 7 wonders of the ancient world (whether it actually straddled the harbor entrance is unknown). If you are feeling the pressure with today’s taxes, call a Cary NC CPA for all your tax-related needs!

Things were fine until 225 BC. An earthquake toppled the statue and not much more is known of Rhodes following the disaster. Did the earthquake wipe out the city? Decimate the harbor? Well, this is the rest of the story. The Roman Senate was angered at Rhodes because during the late Rome-Macedonia War, Rhodes had declared a neutral state. After relying so much on Rome for so many years, Rome wanted more. They wished Rhodes to side with them and contribute to the war effort. So, after the war, the Romans made their move. They established a tax-free port on the nearby Isle of Delos. There wasn’t a two percent harbor tax! In the first year since the port was established, trade declined eighty-five percent in Rhodes. Rhodes was finished. Go here if you want help with modern-day Tax Preparation, bookkeeping, and payroll in Raleigh NC.

So, was it the earthquake that ruined Rhodes’ prosperity? The answer is no, Rhodes had since rebuilt after the earthquake (although they did not rebuild the statue). What brought Rhodes down was not an earthquake or natural disaster or war or famine. It was Roman shrewd tax policy. Everything to dodge a two percent tax. The Switzerland of the ancient world, the commerce giant of the east was toppled because traders desired to avoid a two percent tax.

Keep an eye out for W. Marc Gilfillan’s next chapter in his History of Taxes series: Roman Taxes.

http://www.marccpa.com/

W. Marc Gilfillan

W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

Mithridates the Great was the leader of a tiny nation near what is now Turkey. He had an amazing ability to arouse rebellion among disgruntled taxpayers. In 88 BC he organized a rebellion fighting Roman rule. By promising five years of tax immunity to every city that followed his army, he gathered considerable help.

The Roman Senate quickly took swift action and appointed General Sulla to muster an army and restore Roman authority in the rebellious area. Sulla was victorious in squelching the rebellion after a 4-year struggle. When the revolt was squashed, Sulla ordered the leaders of the disgruntled cities to meet him at Ephesus. There the citizens were to denounce the 5 years of back taxes plus pay the general for the cost of the war.

To enforce this tax, Sulla established “special agents.” These special agents were given the ability to scourge and behead, which was plenty to cause any taxpayer cooperative. Until this time there were self-assessment tax collections, private tax collection, military tax collectors and the traditional government tax collectors. However, these new “special agents” were very skillful specialized men with the arrogance of bureaucrats and the power of military executioners. Taxpayers lost all inclination to evade. If you’re feeling the pressure with today’s taxes, call a Tax Preparer in Raleigh, NC for all your tax-related needs!

Special Agents have been instituted several times in the course of history, surviving in modern times as “financial police” or simply “special agents”, using the title first instituted by Sulla over two thousand years ago. As the practice of Sulla’s special agents was put in to place in other nations, the army came to understand that the rich spoils of war came from their general, as opposed to the Roman Senate. Roman generals returned to Rome with the blind loyalty of their soldiers. Great civil wars broke out as rivalling legions slaughtered each other. With these moderately private armies, establishment of a military dictator was inevitable. Thus, the Roman Republic died. Royalty, dictators, and generals would now run the Roman Empire for the next 2000 years. Democratically designed governments and republics would not play a dominant role in civilization again until the 1800s. Go here if you want help with modern-day Tax Preparation in Cary, NC.

Keep an eye out for W. Marc Gilfillan’s next chapter in his History of Taxes series: Taxes and the American Revolution.

http://www.marccpa.com/

W. Marc Gilfillan

W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

The Rosetta Stone, unearthed by Napoleon, was perhaps the absolute most helpful Egyptian archaeological discovery in history. The Stone had the same text in three different languages: Egyptian hieroglyphs, demotic (known as Egyptian script) and Greek. Using the Greek version, archaeologists figured out how to decipher the demotic and then the hieroglyphs. But the question is sustained: Egyptians had paper, named papyrus, so why was the writing etched in stone? Also, why 3 languages? And why Greek?

The Stone has been in existence before 3000 B.C. The Rosetta Stone was created around 200 B.C. during the reign of Ptolemy V (a king of Greek descent). So where did the Pharaohs go? At this point in history, Egypt was taken over in 700 B.C. by the Assyrians, then the Persians, and finally the Greeks in 330 B.C. After existing for 2000+ years, Egypt was in decline.

The Ptolemy’s were by and large good rulers, but around 200BC, during which the Rosetta Stone was etched, Egypt had just concluded a ten year long civil war. The civil struggle broke out because of exorbitant and oppressing taxes strengthened by tough Greek tax collectors. As the war ended there was still much unrest. Ptolemy V created a Proclamation of Peace which granted general amnesty for all rebels and tax debtors, reigned in taxation practices, ceased forced draft into the navy, and reinstituted tax exemption to the priesthood, temples, and their crops and lands, as it had been in the reign of the great pharaohs. If you’re feeling the pressure with today’s taxes, call a Raleigh NC Accountant for all your tax-related needs!

This was a great edge and financial windfall for the priests and temples and they wanted to make certain first all people knew it and, secondly, did not want it to be taken away again at some time in the future.

As a result, “Rosetta Stones” were carved and put at the entrance of every temple in Egypt. The Rosetta stones acted as warnings to all that tax exemption had been given to the priesthood and this temple and was a “Do Not Enter” proclamation to curtail the lawlessness of the king’s tax men. Go here if you want help with modern-day Tax Preparation, bookkeeping, and payroll in Cary NC.

This still begs the question: why written in stone? The answer is because the priests wanted to make sure it wouldn’t disappear or able to be simply destroyed. Another question was why write it in three languages? The Stone was carved in 3 languages so that everyone could read and follow the message the priests wanted to spread to everyone of Egypt. It was written in Greek to be very clear to the king’s tax men that they couldn’t even go inside the temple gates.

As a result of the most important Egyptian archaeological find in history, the stone unraveled the weird language of the Egyptians, made us capable of discovering the key to hieroglyphic writing and subsequently the key to unlocking the mystery of ancient Egypt and the understanding of the Egyptian way of life for 3000 years was, in truth, a tax document.

Keep an eye out for W. Marc Gilfillan’s next chapter in his History of Taxes series: Taxes and The Colussus of Rhodes.

http://www.marccpa.com/