History of Taxation in the United States of America 1600s - 1800s

History of Accounting > Tax History > History of Taxes in the USA

One of the principle reasons that the United States of American became a
country, instead of staying a colony of England, was because of the taxes
that were imposed on it. Most school children at one time or another will
be taught the following phrase and its significance, “No Taxation without
Representation”. This slogan originated in the 1750’s, and it symbolic
meaning was a driving force behind the American Revolution, which
eventually lead to the 13 colonies breaking away from England, and
forming a nation.

The first taxes imposed on the American Colonies were property taxes,
which began in 1634. Later, the UK Parliament created the first tax
administration in the United States in 1673. Its purpose was to collect taxes
on all items that originated in the colonies, and were later shipped out of
the country. This legislation decreased the exports of the colonies at the
time, by making them more expensive when compared to their competitors.

During this same time period, England was engaged in wars in Europe.
These battles lasted for many years, and they were very costly to maintain.
Because of this, the government needed to raise capital, and continued to
add more expensive taxes on the backs of its citizens in the new world.

The first taxes imposed on the colonists by an institution that was located
in North America were property taxes, which were collected by the local
municipal governments. When the colonist could not take the constant
increases in taxes from England anymore, they tried to form their own
government in the new world, which resulted in a document called “Articles
of Confederation”. Under Article VIII of it, the United States Federal
government did not possess the ability to tax it citizens. At the time the
leaders writing the document, thought it would be best to give the states the

power to institute taxes.

After the 13 colonies won their fight for independence from England, they
formed a nation. In 1787 the United States Constitution was adopted as
the law of the land. The constitution did sanction the creation and collection
of taxes by the Federal government, but it required that a portion of those
taxes to be repatriated to the states based on their populations. At that
time, and up until the 1800’s, the main source of revenue for the new
government came in the form of tariffs.

By 1796, the US had grown by two states, and 14 of the 15 states where
taxing land at the time. The state of Delaware was the only holdout, and
they choose to tax the income that was generated by property, instead
of the land itself. When the Civil War rolled around, most of the states
depended on property taxes as their principle source of income. In addition,
by this time, these types of taxes had become more widely accepted by the
population due to a uniform rate that made them easy to understand and

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