Money Mindset

Chapter 7 Taxes and Insurance

Taxes

Understanding how taxes have been used to support civilizations over the course of modern history can help you realize how important they are to us today as U.S. citizens. While some people may take the viewpoint that fewer taxes or more taxes is better, the following summary will help you as you sift through your own opinions about taxes and the benefits to our society.

Did you know that the earliest income tax was implemented in Mesopotamia over 4,500 years ago, where people paid taxes throughout the year in the form of livestock? The ancient world also had estate taxes, or “death taxes.” The earliest recorded evidence of a death tax comes from ancient Egypt, where they charged a 10 percent tax on property transferred at the time of death in 700 b.c.¹

Since then, the way we pay taxes has changed significantly. However, some ancient taxes still persist in the modern world. In 2006, China eliminated what was the oldest still-existing tax in history. An agricultural tax was created 2,600 years ago and was eliminated in order to help improve the well-being of rural farmers in China. In the United States, the tax system evolved dramatically during the nation’s history. The federal government first imposed income taxes in 1861 to help pay for the Civil War.

Before the 1860s, the government got by on taxing imports and exports. But with the significant cost of the Civil War burdening the treasury, the government enacted a tax rate of 3 percent ...