damn right,
damn taxes

Tax Tips and Trivia from Ed Rubenstein

Ed Rubenstein, a visitor to the Issues USA Main Street Diner, has been the economic consultant for National Review since 1988. His essays have appeared in The Wall Street Journal, The New York Times, the Harvard Business Review and Newsday. For the benefit of Issues USA viewers on the Net, Rubenstein offers some trivia and tips on the subject that was on everyone's minds this April: Taxes!

For most of our history, we didn't have an income tax. The Supreme Court said that the tax was unconstitutional. When the income tax amendment was passed in 1913, its supporters claimed that only the rich would pay the tax.

The top tax rate was originally set at 7 percent. It applied only to people earning more than $300,000 -- the equivalent of $7.5 million of today's dollars.

During the first World War, tax rates were pushed up to 77 percent. They stayed there until the late 1920s. The same thing happened after World War II. Wartime tax rates were as high as 94 percent, and incredibly the top rate stayed above 90 percent for 20 years after the way.

Presidents Kennedy and Reagan gave us significant tax relief. But after reaching a post-war low of 28 percent, the top tax rate, thanks to Bush and Clinton, is now back to 40 percent. Today's bottom tax rate -- 15 percent -- is more than double the rate paid by the rich in 1913.

Last year the government raised $700 billion a year from income taxes -- 14 times more, in real dollars, than in 1913. And it's no longer just for the rich: More than 100 million tax returns are filed each year.

Today, the median income family -- mom, dad, two children -- pays more than $5,000 in income taxes, or more than 14 percent of its income. When you include Social Security, Medicare, sales and other taxes, about 40 cents of every dollar goes to the government.

For the median family, taxes are a larger expense than housing, food and clothing combined.

See if you can make cents of the following tax facts and figures:

If This is a Branch, How Big is the Tree?
The Size of the IRS

As Easy as A-B Squared Divided by the Square Root of C
The Complexity of the IRS

"Go Ahead: Take My Pay!"
Problems Complying with the IRS

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