Personal FinanceTaxes

The Creation of the Income Tax and the Robin Hood Theory

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Did you know that at one time the United States never had an income tax and only levied a tax in order to fund a war? If fact, the only reason a federal income tax ever became instated was because of what was considered a Robin Hood theory, which was to take from the rich and give to the poor.

The Robin Hood Theory

The income tax at the federal level was passed in the United States in 1913 and eventually became instated as the 16th amendment but was only intended for the rich. In fact, it was the mass majority of the American people that wanted its creation.

Around this time (just as today) the majority of the American population believed the ultra-rich had too much money, and that their money should be redistributed to the poor and used for funding of public programs. Keeping this in mind the masses wanted to instate an income tax that would be intended for only the rich to pay.

As with most taxes that have been passed that were intended for the rich, the rich find ways and loopholes around them and the taxes end up having to be paid by the middle class. This too was the scenario with the creation of the income tax.

 

As stated above, the main reason an income tax was permanently introduced and passed into law was so the rich would have to pay a portion of their high incomes in the form of taxes to the government which in turn would be used to help out the poor and fund public programs. Although, after the government got a taste of money it began to become greedy and wanted more. Eventually, this lead to an income tax for everyone at all income levels and the creation of more taxes.

Continued Government Growth

Every year the U.S. government continues to grow and get bigger. The government adds new positions and sectors and pay generous salaries and pensions to their employees. In order for the government to fund its growth, they have to increase tax revenue.

All Tax Dollars Received Must be Spent

What many people do not realize is that the government cannot stash away and save tax dollars. If there are ever any funds left over, that organization or program that had leftover funds would be thought of as receiving too much money and they would be penalized and their funds would be cut. In order to avoid penalties and cut funding, government entities must spend all the money in their budgets and not have any funds left over.

 

Increased Taxes for the Rich Always Fall on the Middle Classes Shoulders

The original introduction of a permanent income tax in 1913 was welcomed by a large majority of the American citizens because at first it was only intended for the rich. It was the Robin Hood theory, the concept of taking from the rich and give to the poor which passed the income tax into law. Eventually, this came back to bite everyone, the middle class the most.

Since the permanent introduction of the income tax there has been tax increases and new taxes created that were originally intended for only the rich, but over time the middle class have been the ones who end up paying these taxes.

Even today there is talk about raising taxes for the rich, creating new taxes for the rich, and ways to redistribute money from the wealthy to the poor. Although, if we have learned anything from our history the rich always find ways to avoid these taxes and the burden falls on the middle class.

 

 

 

 

Author: Tyler DeBroux

Tyler started Oddball Wealth towards the end of 2014 after graduating college, as a way to stay relevant in his area of study, stimulate his mind, and to educate and help others.

Tyler has worked in the financial services industry, as a financial advisor, helping his clients make wise financial decisions and personalized long-term financial plans. Since graduating college in December of 2014, Tyler has paid off more than $15,000 in student loan debt and counting, his goal is to have all his student loans paid in full by the in of 2016.

Tyler is an entrepreneur and an expert in personal finance. Two of his many hobbies include investing and building online businesses. He is also a big advocate of early retirement and an aggressive saver, who utilizes any financial resources and tools available to him to help reach his goals for achieving financial independents.

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