It wasn't until World War II -- and the attendant need to fund U.S. participation in the war -- that the withholding of taxes from the wages of middle class workers was instituted. By the end of the war, even the lowest bracket of wage earners paid about 20 percent of their earnings in income taxes -- making the tax system truly universal. Meanwhile, by 1944, those on the top end of the income scale, with incomes over $200,000 ($2 million in 2011 dollars), were levied a 94 percent tax rate.
And with that run-up and expansion in taxation was launched a political fight that has stayed with us, and which again threatens in 2012 -- when a host of tax cuts are set to sunset at the end of the year -- to bring the federal government to its knees as the White House and House Republicans again clash over to how best to raise revenue, what programs to fund, and how or whether to slash the deficit during a sluggish economic time.
Read Full Article »