Celebrating Tax Day

As you no doubt know, your tax return must be filed by April 15. When that due date falls on a Saturday, Sunday, or legal holiday, the filing deadline is delayed until the next business day. If you’re wondering why tax day is the 17th in 2018, you’re probably not familiar with Emancipation Day, a legal holiday in Washington D.C. Abraham Lincoln signed the Compensated Emancipation Act on April 16, 1862. This Act freed the more than 3,000 slaves in the District of Columbia. (Slavery was outlawed in the rest of the nation by constitutional amendment in 1865, after the end of Civil War. Mississippi ratified the amendment in 1995.) Emancipation Day became an official D.C. holiday in 2005.

War is expensive. Also in 1862, President Lincoln created the position of Commissioner of Internal Revenue and enacted an income tax to pay for the war. The tax was abolished ten years later. Income tax was legislated again in 1894, but the Supreme Court declared it unconstitutional. The 16th Amendment, providing for a tax on income was ratified in 1913. The rate was 1% and increased to 7% on incomes above $500,000. (The equivalent of $12.6 million in 2018.) With the onset of the Great War a couple years later, the rates doubled.

And here we are. One wonders about Donald Trump’s tax returns. Is money laundering taxed as ordinary income or does the more favorable “carried interest” rate apply?

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