Britain once burned its income tax records to celebrate the tax's repeal
When Britain scrapped its wartime income tax in 1816, a year after Waterloo, opponents wanted every trace of it gone. The Chancellor of the Exchequer duly burned the tax papers in public. Someone, however, had kept copies in the tax court's basement, and within a generation the tax was back for good.
Taxing income is a surprisingly modern idea. It needs money in circulation, fairly accurate accounts, shared ideas about what counts as receipts, costs and profit, and a stable society that keeps reliable records. For most of history those conditions were missing, so rulers taxed land, wealth, rank or slaves instead, and tithes offered only a rough precursor. A striking exception came in 9 CE, when the Chinese emperor Wang Mang levied ten percent on the net earnings of fishermen, herders, traders and foragers, with audits and a year of hard labour for evaders. It proved so unpopular that it was abolished in 22 CE.
Medieval England tried a version in 1188, when Henry II's Saladin tithe claimed a tenth of income and movable goods to fund the Third Crusade, and Portugal introduced one in 1641. The modern tax is usually dated to 1799, when William Pitt the Younger brought in a graduated levy to pay for war with revolutionary France, rising to ten percent on incomes over 200 pounds. He hoped for 10 million pounds a year and collected barely 6 million. Repealed, revived and repealed again, it returned under Robert Peel in 1842 to plug a deficit, supposedly temporarily, and William Gladstone kept it to help pay for the Crimean War.
The American path was bumpier. The first federal income tax arrived in 1861 to fund the Civil War, at 3 percent on incomes above 800 dollars. A peacetime tax in 1894 was struck down by the Supreme Court as unconstitutional, and only the Sixteenth Amendment in 1913 settled the matter. Top rates later exceeded 90 percent during the Second World War.
Most systems today share basic features: progressive rates that climb with income, deductions for the cost of earning it, and withholding at source. Residency often hinges on spending more than 183 days in a country.
Source: Income tax
