Did you know that a former IRS Commissioner was sentenced to 5 years in prison for tax
evasion? Hi, I’m Erin McCarthy, editor-in-chief of Mentalfloss.com, and welcome to The List
Show ... from my living room. In 1952, Joseph Nunan, who was the IRS Commissioner from 1944
to 1947, was busted for evading over $90,000 in taxes. Among the transactions that he failed
to claim was $1,800 in winnings from a wager that Harry Truman would beat Thomas Dewey
in the presidential election of 1948.
And that’s just the first of 25 tax facts we’re going to share with you today — all
of which will be waaaay more interesting than working on your own taxes, I promise.
So, speaking of tax evasion! You probably
know that mob boss Al Capone was ultimately taken down over his taxes instead of any of
his other involvement with crime.
You may even know that Willie Nelson made a whole album just to help cover his massive
tax debts. (It was called the IRS Tapes, and all proceeds went to the IRS.)
But did you know that Henry David Thoreau
went to jail in 1846 for failing to pay taxes? It was a poll tax, which just means a tax
levied on every individual, regardless of income. Poll taxes were once typical in much
of New England. Paying the tax was typically a requisite to be able to vote, so they often
functioned as a form of de facto discrimination against poorer citizens. Thoreau’s refusal
to pay the poll tax was his way of protesting slavery. Someone paid the tax on Thoreau’s
behalf, however, and he was released the next morning.
Enough about skirting taxes. Let’s back
up to the basics: Who had the bright idea for taxes, anyway? Uh, thanks, Horus. We can
trace documented records of taxation all the way back to Ancient Egypt, sometime around
3000-2800 BC. Apparently there was a biennial event called the Following of Horus, when
the Pharaoh went around collecting taxes in his dual roles as head of state and living
incarnation of the god Horus. Taxation is even described in the Bible, when Joseph tells
the people of Egypt to give a fifth of their crops to Pharaoh.
OK, so who had the bright idea for federal
income tax here in the States? Uh, thanks, Lincoln. Abraham Lincoln signed the Revenue
Act in 1861, which imposed the first-ever federal income tax. To drum up funds for the
Civil War, Lincoln and Congress enacted a modest 3% tax on income over $800, which would
be roughly $23,000 today. The law was almost instantly replaced with a new revenue act
and would be repealed a decade later, but the relief obviously didn’t last: In 1913,
the 16th Amendment established the federal income tax system we all know and love today.
But Lincoln’s income tax wasn’t the first
tax ever imposed in the U.S. Fans of the Broadway musical Hamilton probably remember the line,
“Imagine what gon’ happen when you try to tax our whiskey.” What happened was the
Whiskey Rebellion, which was largely due to a tax that A [dot] Ham imposed on—you guessed
it—whiskey.
As you might imagine, people were extremely unhappy about it, especially small producers
of whiskey, who, because of the way the tax was structured, had to pay nine cents per
gallon in taxes, while larger producers were able to get as low as six cents. (Some things
never change.)
Violence quickly broke out. Tax officers were assaulted and tarred and feathered for trying
to do their jobs, and several people were killed during riots. The Rebellion was eventually
quashed in 1794, and the whiskey tax remained in effect until 1802, when Thomas Jefferson
repealed it.
Now, why is Tax Day in the United States April 15? At least on normal years … Well, it
originally wasn’t. When the modern federal income tax was established, lawmakers set
March 1 as the looming deadline.
Although they gave no reason for this particular date, it was presumably to give people a couple
of months to gather paperwork and crunch numbers after the end of the year. By 1919, the government
tacked a couple of more weeks on to help panicked filers, making March 15 the date. That date
stood until 1955, after Congress acknowledged that doing your taxes was getting more complicated
by the year.
To help accommodate all of those changes and give people adequate time to file, the date
was bumped by another month - but the change wasn’t entirely altruistic. The IRS acknowledged
that the extra month would help their employees as well, spreading the workload out across
another 30 days. This year, as you probably heard, the federal income tax deadline has
been pushed back to July 15th in light of the COVID-19 pandemic.
The amount of time we spend doing our taxes every year suggests that the repeated date
changes may have been justified. According to the IRS, the average taxpayer spends about
11 hours doing record keeping, tax planning, form submission and other super fun tax-related
activities. Of course, if you break it down even further, the amount of time changes based
on the type of form the filers use. Business filers spend about 20 hours, including 10
hours on recordkeeping alone. Ugh.
While we’re talking averages, the average American gets about $3,000 back from their
tax refund each year. This ebbs and flows a little bit every year based on the economy,
fluctuating consumer incomes, and the IRS’s withholding tables, which suggest how much
employers should deduct from employee paychecks to account for income tax. It’s worth pointing
out that a huge tax refund isn’t necessarily a great goal: It basically means you gave
the government an interest-free loan that year.
And getting money back isn’t just limited
to personal taxes. Let’s go alllll the way back to 1836, a year when the federal government
had a tax surplus in the neighborhood of 30 million dollars. I know!
Congress gave most of the money back to the states, and each state was able to decide
how to handle it. Maine decided to give back to the people, which meant that every single
resident received a whopping $2. A woman named Salome [Sal-O-may] Sellers used her money
to buy a pair of fancy candlesticks. As she told the New York Star Tribune in 1902, when
she was about to turn 101 years old, quote, “Many people put their share of the surplus
into flimsy finery . . . but I bought something that would keep to remember those good times
by.” Today, those surplus sticks are in a museum.
Isn’t tax history fun? I’ve got some more
for you. This one’s from Russia, where, in 1698, Peter the Great introduced a beard
tax. After embarking upon what he called a “Grand Embassy” across Europe to observe
more about Western cultures and processes, Peter came back with a number of reforms designed
to bring Russia up to speed—and one of those reforms impacted facial hair.
The tsar noted that “modern” Western Europeans eschewed beards, and he wanted to emulate
the trend within his own borders. If that doesn’t seem strange enough, wait until
you hear how he unveiled his new anti-beard beliefs: At a big state reception, the tsar
whipped out a massive barber’s razor and proceeded to shave his guests’ beards.
Although Peter was originally against beards entirely, he eventually decided to make money
off of his ban by allowing facial hair, but taxing it. Nobility and merchants were charged
significantly more than commoners, by the way.
I don’t know of any taxes on facial hair
these days, but unusual taxes still abound. In England, shelled nuts are subject to a
20% value added tax.
And India’s “entertainment” tax can be even worse. Movie tickets are taxed anywhere
from 18-28 percent depending on the price of the tickets. This is actually an improvement
- before the government launched the Goods and Services tax, it was left up to each state
to set their own entertainment tax. In Jharkhand, the tax was 110%.
And let’s talk about the cow flatulence
tax. Cow farts—well, really more like cow burps—are no laughing matter. The methane
they produce is contributing to climate change in a big way. To help offset some of these
drawbacks, many EU countries are looking at introducing a cow tax to tax producers for
cow flatulence.
How about a special hat tax? From 1784 to 1811, British citizens had to pay a tax on
their hats. To prove they paid the tax, a stamp was pasted inside of the hat. If the
hat police caught you wearing a stamp-less hat, you’d be hit with a hefty fine.
Seem extreme? It gets worse. In 1798, a man named John Collins was caught using a printing
press to forge the stamps, which would allow people to skirt the tax. He was sentenced
to death.
There are always people who get creative with their tax deductions. While most don’t pass
muster, the Tax Court, a court of law dedicated to tax-related disputes and issues, does occasionally
find in favor of some pretty unusual claims.
For example, TurboTax tells the story of a professional bodybuilder who successfully
claimed his supply of body oil as a professional necessity. However, the court wasn’t a total
pushover — he also tried to claim buffalo meat and vitamin supplements, which they nixed.
Now I’m reconsidering writing off that lifesize cutout of Theodore Roosevelt...which I needed...for
work.
Do you live in New Mexico? Have you lived there for at least a century? Then I’ve
got great news for you! You don’t have to pay state taxes. The Land of Enchantment provides
a major tax break to all centenarians. But considering there are only 80,000 100-plus-year-olds
in the entire United States, New Mexico isn’t exactly losing out on major money by providing
this perk.
The IRS is a notorious stickler for on-time filing — which no one knows better than
Jack Swigert, the command module pilot for Apollo 13 who joined the crew at the last
minute. He was mid-mission when he realized that he was going to miss the April 15 deadline,
so he radioed Houston to request an extension.
Although the ground crew laughed at what they presumed was a joke, Swigert was dead serious.
According to NASA transcripts, he said, "Hey, listen, it ain't too funny; things kind of
happened real fast down there, and I do need an extension. I didn't get mine filed, and
this is serious."
This sort of thing happens more than you might expect, by the way. In 2005, NASA astronaut
Leroy Chiao was commanding the 10th expedition to the International Space Station when Tax
Day reared its ugly head. He prevailed upon his sister, an accountant, to file an extension
of his behalf, and he got right on it when he returned to Earth on April 24.
The President of the United States isn’t
exempt from taxes. In fact, the POTUS is expected to pay their rightful share, though there
are a few nice perks, including a nontaxable travel account worth $100,000 and a nontaxable
entertainment account with a $19,000 limit.
Of course, those policies can always change. The IRS updates tax requirements on a regular
basis, and with the Reform Act of 1986, they started requiring taxpayers to list their
dependents’ Social Security numbers for the first time. When citizens were forced
to provide this evidence, several million children mysteriously “disappeared” from
tax returns.
As of 2018, only 10% of people were still filing paper tax returns. Not only does this
mean that those people will wait longer to get any refunds back, it also increases their
chances of screwing things up: Paper tax returns are around 40 times more likely to contain
mistakes compared to online filing.
And since most of us are filing online now, here’s a great tip: There’s a good chance
you can file your taxes for free. If your adjusted gross income is less than $69,000,
you’re eligible to use IRS Free File. 70 percent of filers qualify, which works out
to 100 million Americans.
If your adjusted gross income is more than $69,000, you can still use Free File. But
it’s not going to walk you through the process step-by-step like the other version, so you
have to feel pretty comfortable doing your taxes.
One guy not comfortable with taxes, specifically
with collecting them: Founding Father Sam Adams. Adams was elected to Boston’s tax
collector post in 1756, but he wasn’t terribly interested in the job. He was prone to overlooking
tax debts from people having financial or medical difficulties, which made him a bit
like Robin Hood to working class Bostonians.
The problem was, the tax collector was personally liable for uncollected taxes — and by 1765,
he owed more than £8,000 — equivalent to nearly £1.5 million today. He did end up
trying to go after some of the uncollected taxes, but apparently without much success.
According to the New England Historical Society, his well-to-do friends ended up covering most
of Adams’s debt.
Finally, let’s talk about the time Vermont declared war on Germany for tax purposes.
In the lead-up to the United States entering World War II, Vermont lawmakers voted to give
residents serving in the military a $10-a-month bonus. If the raise was instituted during
peacetime, though, everyone would have been hit with a new tax. In order to avoid it,
the bonus needed to be issued during a time of armed conflict.
War hadn’t officially been declared yet,
but President Franklin Roosevelt had issued orders for the U.S. Navy to shoot first if
they came across German ships in waters “necessary for our defense.” Vermont lawmakers decided
this order was enough for them to basically declare we were at war with Germany in September,
1941 — three months before the United States did.
Hey guys. Before Erin wraps things up, just wanted to share a quick message.
Hello. My name is Justin.Welcome to my bathroom.
You can see my on our shows Misconceptions and Food History, but if you happen to be watching this episode
the week of April 15th, 2020, you can check me out this Friday when we go live
for the premiere of our new series, Tub Trivia.
It's kinda like pub trivia, but...with one...major...difference.
It's gonna be super fun, so if you like trivia, make sure to check it out.
Friday the 17th, 7pm, Eastern Standard Time, right here on the Mental Floss YouTube channel.
Now if you'll excuse me, I actually have to finish conditioning.
Our next episode is about Child-Rearing Tips from the 1800s. We had planned to film that
episode a while ago, but rearranged our schedule when the COVID-19 pandemic hit. On that note,
if you have any lists you’d particularly like to see while you’re quarantining, let
us know in the comments. Also, feel free to take bets on when I’m going to start cutting
my own bangs. We’ll see you soon!