Taxes Origin Story + Future Possibilities

The Taxes Origin Story, aka: why do I feel mad about something that should be making my life better but somehow isn’t? Also known as: how a lot of people feel about money in general.


Are taxes ‘bad’? The misuse of public funds for private gain is definitely unethical – and I suspect many readers also feel the use of public funds for harmful ends, like warmongering, is also immoral. Finally, feeling like you’re “forced to give away your money – for nothing!” feels crappy. But, does that make taxes themselves what is wrong? 

My stance is that taxes could represent collective public wealth we get our representatives to use to heal and help. In fact, this is why one might feel demoralized when they are not used wisely: because it is, frankly, all our money and a representation of our time put in to make that money. Taxes pay for medical care, retirement, infrastructure, food programs and other uses I believe are an excellent use of public wealth. I personally think that more of the taxes should pay for more of that stuff and less/none towards tanks and bombs.

I’ve dug into what taxes are used for in other posts and I love to remind US taxpayers there’s a data viz tool where you can go look at what your taxes are spent on

But what might we learn from other places or times? Is taxation always, in the conservative view, theft?


Back in the medieval day in Europe a representative of the monarch would come by every few years and levy the geld, a land tax on property holders, or the tax on “movable property and income,” or a tariff on trade. Oh and the church also took 10% and called it tithe. None of these were popular, and definitely none of them had transparent spending unless you count observing the new rubies on the King or a Priests scepter as transparent.

In premodern China, taxes were primarily land taxes ranging from 3% to 25% over the dynasties. Various goods, especially salt, were run as state monopolies as other sources of revenue. In India, the origination of income, taxation is rooted in the Manu Smriti and Arthasastra eras, and was focused on maximum social welfare principle – though their modern income tax laws date to around the same time as the US, finally, made income taxation permanent at the beginning of the last century. The idea was pre  


Taxes in the US are historically contentious, with our origin story being that high taxation by the British instigated the fight for independence in the first place. Federal taxes on individuals and businesses did not exist in the US until the Civil War ravaged resources and people, but were then repealed as unconstitutional and fought in the Supreme Court at the end of the 19th century. Income/revenue taxes for individuals and businesses weren’t federally mandated until the passage of the 16th Amendment in the early 20th century, a few years before WW1. (Before then, the US government got its money from import tariffs and excise taxes, spent a lot less money, but also the world literally used money less, then.) 

1934 – 2017 tax income, USA, from Wikipedia

Corporate business taxes and personal income taxes were introduced at the same time. As of 2018, the corporate tax rate on profits is 21%, down from the 35% tax rate implemented in the 1980s. Previous to that it had been around 50% starting in the late 1930s, the rate it had climbed to from the few% it was when it was introduced in 1909.

At the beginning, individual high earners were also taxed at low 7%, but by the 1930s that was up to 91% and stayed high into the 1960s, effectively creating a maximum wage by heavily disincentivizing incomes over the highest tax rate level. Why pay someone a rate you know that 91% of which they won’t get? 

Currently, the highest federal income tax bracket is 37%, and the range of tax rates starts at 10% and steps up as more money comes in. My observation is that the experience of going from earning under $35k to over $45k is a challenge financially in part because the tax rate jumps up 10% in that step, around $40k, and people aren’t prepared for the increase in taxes. Many people also pay state, and sometimes city or municipal taxes as well. In the current system federal income tax brackets increase with earnings, but don’t take accumulated wealth into account.


The tax on accumulating wealth in the US is minimal: if you inherit over $11 million, there is an estate tax. If you sell an asset like property or stocks which you’ve had more than a year, there’s a capital gains tax of 0%-20% depending on your income. But sitting on stacks of assets will cost you little to nothing, tax wise.

Does this seem like this taxation scheme might favor the massive accumulation of wealth? It does, especially if you analyze by accrued wealth, and not by income – Elizabeth Warren cites “Saez and Zucman, [that] the families in the top 0.1% are projected to owe 3.2% of their wealth in federal, state, and local taxes this year, while the bottom 99% are projected to owe 7.2%.” She has proposed an “Ultra Millionaire tax” – an 2% annual tax on household net worth between $50 million and $1 billion, with an additional 4% tax on wealth over $1B. What that means, functionally, is that holding over $50M is slightly disincentivized ince you’ll earn less; and holding over $1B is highly disincentivized, since the 6% tax will eat up most anticipated earnings after inflation. You can keep your B, but you can’t balloon it up. 

In The Ink Anand Giridharadas interviewed writer Ayad Akhtar, who commented this on the implications of wealth and asset hoarding: “There is no way for people to participate in the [financial] decision-making bodies that are actually responsible for most of the infrastructural decisions in their lives,” and later, “We see this with the enormous amount of money that’s being dumped into the system, which is going almost straight into the markets, buying assets. We’re baking in a dispossession of the folks who don’t own assets.”

Disincentivizing wealth holding over a certain amount, and creating a system in which the output of that disincentivization creates public wealth to be applied to those who are dispossessed, is an idea whose time may be near.

Similarly, if we look back to the China and England examples, taxing held assets — at that time, land — was THE way to raise money since it was THE direct route to the people with the moneybags. Taxing what you hold isn’t some newfangled idea.

Economists Glen Weyl and Eric Posner resuscitate an idea from a 19th century economist  in Radical Markets, where they suggest that taxes on land and property be related to use in order to disincentivize hoarding and land-grabs, but still allow for people to say maintain a household.


In the US, we like to act like our way of doing things is sooooo innovative but, are we really better served than people in other countries?

For all the taxation that occurs, our level of services and social safety nets is far lower than in the EU, Japan, or Canada, the Atlantic reports. Healthcare, childcare, college, and older age care are all pushed onto individuals to pay for, rather than aggregated and therefore risk managed across the population. 


Now, we sum our income and submit paperwork digitally to “file taxes”. There are three types of tax filers:

  1. I do my taxes in February as soon as I have all my paperwork
  2. I do my taxes the night before they are due and pray the software doesn’t crash [again]
  3. I file an extension and do them as late as humanly possible, berating myself and lamenting my poor habits and decisions the entire time.

Which one are you? 

I used to be a type three until I started running all my business income/expenses through their own bank accounts and started using a software to automate summing up the categories. Now I’m a type one. It feels good not to avoid the truth of my situation anymore and just get it done. I find that even when I owe taxes, I like to be informed and ahead of the game, and not trapped in a swirl of anxious wondering. Maybe that’s just me.

Practical news flash: 

In the US, the tax filing and payment deadline, as well as the IRA contribution deadline has been extended for individuals and spouses to May 17 for the 2020 year. Note that corps are still due April 15 and partnerships were due March 15. In Canada, the tax-filing deadline for most Canadians is on April 30, 2021. For those Canadians who have a self-employed person on the taxes, the deadline extends until June 15.

But just because you have more time, should you take the type 2 approach? Or … type 3? What is it about taxes that makes some people avoid them: the overlord history? the numbers and complexity? Owing money? Having to face your finances, using someone else’s rules? Feeling complicated about what the government uses taxes for, or who pays and who doesn’t?

However you feel about the taxes you’re filing, I hope you enjoyed learning some history and ideas for what taxes can do or where the US could take them!