- You may have heard the Ben Franklin saying:
In this world, nothing can be said to be certain
except death and taxes.
- Yes, taxes have been with us since civilization began.
In order to perform essential services,
governments need money.
That money has most frequently come in the form of taxes.
- Now taxes have been a part of a human society
for thousands of years.
For example, in ancient Egypt peasants too poor
to pay their taxes were required to provide forced labor
on public projects such as the pyramids.
- An unpopular income tax was launched
by Chinese Emperor Wong Mong in the year 9 A.D.
The tax rate was 10% of profits.
The Emperor was deposed 14 years later.
- The first income taxes weren't collected
in the United States
until the American Civil War in the 1860s.
Income taxes were not a permanent part
of the U.S. federal government financing until 1913.
- Yes, and those first U.S. income tax rates
in 1913 ranged from just 1% to 7%.
- Now if you think about the practical difficulties
associated with computing and collecting income taxes,
you will understand why governments have historically
relied on other taxes such as property taxes, head taxes,
a certain amount per person, and import/export taxes.
- [Taller Man] There are substantial practical difficulties.
First of all, what is income?
What expenses are acceptable deductions
when computing this income?
How will the tax be collected?
Will the reported income be verified, and if so, how?
- Now one approach to this practical difficulty has been
for governments to subcontract the collection
of income taxes.
In biblical times,
these tax collectors were called publicans.
They were also called tax farmers.
- One famous French tax farmer was Antoine Lavoisier,
the father of modern chemistry,
and the discoverer of the element oxygen.
Tax farmers were a targeted group in the French Revolution,
and Lavoisier was beheaded at age 51.
- These days we don't use the term tax farmer.
Governments around the world
now collect their own income taxes,
some more successfully than others.
- Now, right now, let's get an introduction
to the theory and practice of income taxes.