This episode explores the history and complexities of the US tax system, tracing its evolution from a simple, low-revenue system in the early republic to the intricate, often frustrating system we know today. Against the backdrop of the American Revolution, fueled by tax disputes, the early government cautiously approached taxation, relying primarily on excise taxes and tariffs. More significantly, the Civil War necessitated the first federal income tax, establishing the IRS and generating substantial revenue, but this tax was later repealed. The 16th Amendment, ratified in 1913, finally enshrined the federal government's right to levy income tax. World War II dramatically expanded the tax base, transforming it from a class tax to a mass tax and introducing employer withholding. However, the post-war era saw the tax code become increasingly complex due to attempts to engineer taxpayer behavior and ensure fairness, leading to a labyrinthine system. For instance, the simple four-page tax form of 1913 ballooned to a 106-page document in 2025. The episode concludes by examining alternative, simpler systems used in other countries, such as return-free filing, and highlighting the ongoing debate about reforming the US tax code to improve the taxpayer experience and restore public trust.
