“The hardest thing in the world to understand is the Income Tax.” Albert Einstein

Taxes are perhaps one of the only things in existence to be both the cause and the resolution for wars throughout history. They are a civil duty—a burden to some and benefit to others—whose history is often neglected by today’s taxpayers. It is our civil duty to pay tax, but it’s our well-earned right to understand why.

Not surprisingly, the early Greeks and Romans were the first to incorporate simple taxing systems in their societies, though more complex systems like sales tax and consumption taxes didn’t appear until these small civilizations grew into larger empires.

For the US, we are a country that was founded and now thrives on taxes. Our country began with a revolt against British tax on tea, and in the 240+ years since, we’ve only added to our country’s taxing powers. But why? Before ratification of Constitution, the US lacked power to tax its citizens, or any means of raising federal revenue for that matter. For the most part, only excise taxes or tariffs existed; it was enough for us as a young nation, but as we grew, so did our need for superior forms of taxation.

If the American Revolution showed that taxes have the power to cause wars, then the Civil War was proof that wars, conversely, have a major influence on taxes. The massive national debt that resulted from our country’s Civil War led to the first implication of an income tax in 1862. The income tax as we know it today would later make its official appearance in 1913 with the ratification of the Sixteenth Amendment, which gave such a right to levy and collect income taxes to Congress. The Civil War also necessitated the establishment of the first Office of Commissioner Revenue, which would eventually evolve into the Internal Revenue Service (IRS).

The country’s economy boomed towards the 1860s; cost accounting provided accountability during this new industrial age. This is to say, of course, that as our economy grew more complex, an obligation paralleled for Congress to more strictly regulate financial accounting. This led to the creation of public regulation as well as private organizations, like AICPA (American Institute of Certified Public Accountants) in 1887 and FASB (Financial Accounting Standards Board) in 1973, that help regulate accounting standards.

Throughout the 20th and 21st centuries, taxing practices grew standardized, clearing the path for a new focus in the world of accounting: technology. Tabulating systems were used from the 1890s until IBM introduced the 700 computer line in the 1950s. Payroll was first computerized not long after in 1953, and became common practice through the next few decades. These days, computers and accounting and tax software drive the industry single-handedly. QuickBooks, CCH Access, ProSeries, Botkeeper—these are but a few of the digital programs that have helped accounting firms today thrive and sustain their practices virtually throughout the global COVID-19 pandemic.

If there is anything for future generations to learn from this year in history, it’s that Benjamin Franklin’s astute observation still reigns true: “In this world, nothing can be said to be certain, except death and taxes.”

Taxes and accounting are here for the long run, and fortunately, so are we. Visit our website, email, or call us at 516-541-6549 to learn more about our accounting services.

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Sincerely,

Devin McQuillan
Associate, Creative Solutions

Contact:
516-541-6549 | Email

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