(UPI) — Tax day is here once more, and tens of millions of Americans will rush to file their income taxes by this year’s deadline of April 18 (rather than April 15 for a variety of reasons).
Although most of us probably identify the federal income tax with the revenue that ultimately fills the government’s coffers and allows it to spend our hard-earned cash, it actually makes up less than half of all revenue. What makes up the rest, and how those figures have changed in recent decades, is actually quite surprising.
The official statistics show that in the 1940s and 1950s, corporations picked up a major share of supporting the federal government. Today, it is taxes on workers that increasingly fund the military, entitlement programs, healthcare and other spending.
So as you prepare your taxes – at the same time that Congress and the Trump administration are gearing up to reform the tax code – here’s a brief primer on how what you put on line 63 of your 1040 becomes a part of U.S. government revenue.
The income tax: Steady as she goes
Since World War II, the federal government’s revenue has come from four main sources.
The first place is individual income taxes. The United States has continuously had a personal income tax since 1913, when the 16th Amendment was ratified by two-thirds of the states. Prior to that, an individual income tax was deemed unconstitutional and most government revenue came from customs duties.
The income tax takes not only a portion of wages but also money earned from interest, dividends, capital gains and other sources. In 1945, the personal income tax provided a bit over 40 percent of all federal government revenue. In 2015, the latest available figures, personal income taxes provided 47 percent of revenue. This is a relatively small rise compared to the dramatic changes in the other three categories.
The wealthiest Americans pay most of this tax, with individuals with adjusted incomes of $250,000 or more (2.7 percent of filers in 2014) covering 51.6 percent of the tab. Those with incomes of less than $50,000 (62.3 percent of filers) paid 5.7 percent of federal income taxes that year.
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