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In its 2012 annual report to Congress, the National Taxpayer Advocate estimated that American taxpayers spend 6.1 billion hours a year complying with the income tax code, based on IRS estimates of how much time taxpayers (both individual and businesses) spend collecting data for, and filling out tax forms. That amount of time spent for income tax compliance would be the equivalent of more than 3 million Americans working full-time, year-round (2.22% of payroll employment). By way of comparison, the federal government employed 2.78 million full-time workers in 2012, and Wal-Mart, the world’s largest private employer, currently employs 1.4 million workers in the US (both full-time and part-time).
“In the beginning,” when the income tax was first introduced in 1913, it used to be a lot, lot simpler and a lot easier, basically like filling out a tax return on a postcard.
For example, page 1 of the original IRS 1040 income tax form from 1913 appears above. There were only four pages in the original 1040 form, including: two pages of worksheets, the actual one-page 1040 form above, and only one page of instructions, view all four pages here. In contrast, just the current 1040 instructions for 2012, without any forms, runs 214 pages.
Individual income tax rates started at 1% in 1913, and the maximum marginal income tax rate was only 7% on incomes above $500,000 ($11.725 million in today’s dollars). The personal exemption in 1913 was $3,000 for individuals ($70,350 in today’s dollars) and $4,000 for married couples ($93,800 in today’s dollars), meaning that very few Americans had to pay federal income tax since the average income in 1913 was only about $750. The Tax Foundation has historical federal income tax rates for every year between 1913 and 2013 here.
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