damn right,
damn taxes

For most of our history, we didn't have an income tax. The Supreme Court said that the tax was unconstitutional. When the income tax amendment was passed in 1913, its supporters claimed that only the rich would pay the tax.

The top tax rate was originally set at 7 percent. It applied only to people earning more than $300,000 -- the equivalent of $7.5 million of today's dollars.

During the first World War, tax rates were pushed up to 77 percent. They stayed there until the late 1920s. The same thing happened after World War II. Wartime tax rates were as high as 94 percent, and incredibly the top rate stayed above 90 percent for 20 years after the way.

Presidents Kennedy and Reagan gave us significant tax relief. But after reaching a post-war low of 28 percent, the top tax rate, thanks to Bush and Clinton, is now back to 40 percent. Today's bottom tax rate -- 15 percent -- is more than double the rate paid by the rich in 1913.

Last year the government raised $700 billion a year from income taxes -- 14 times more, in real dollars, than in 1913. And it's no longer just for the rich: More than 100 million tax returns are filed each year.

Today, the median income family -- mom, dad, two children -- pays more than $5,000 in income taxes, or more than 14 percent of its income. When you include Social Security, Medicare, sales and other taxes, about 40 cents of every dollar goes to the government.

For the median family, taxes are a larger expense than housing, food and clothing combined.

See if you can make cents of the following tax facts and figures:

If This is a Branch, How Big is the Tree?
The Size of the IRS

• The IRS has 114,000 employees. That's equal to the population of Peoria, Illinois. It is twice as big as the CIA and five times the size of the FBI.
• IRS employment has increased 20 percent over the past 10 years. The rest of the government shrank by 10 percent over that same period.
• The IRS spends $8 billion per year; its budget has doubled over the past 10 years -- but who's conunting? After all, it collects $1.7 trillion in tax revenues.

As Easy as A-B Squared Divided by the Square Root of C
The Complexity of the IRS

• When the income tax first took effect it had 170 pages of laws and regulations. Today, the tax code has 17,000 pages, along with hundreds of thousands of pages of court decisions. The 1986 tax act was aimed at simplification. It ended up amending 2,000 sections of the code and creating more than 100 new forms.
• In 1985, Americans spent 5.5 billion hours complying with the income tax laws, according to the IRS. That's equivalent to nearly three million people -- more people than serve in the Armed Forces work full time just keeping records and filing forms.
• According to the Tax Foundation, it costs us $200 billion a year just to comply with the tax code. That's like taking every new car, van and truck that General Motors builds and driving them off a cliff.
• Each year the IRS sends about 10 million computerized notices to taxpayers accusing them of underreporting income or miscalculating tax payments. A GAO study found that 48 percent of these notices contained errors.
• The IRS answers about 80 million taxpayer questions each year. Eleven percent of the time the IRS is wrong. That means that 8.5 million people are getting wrong tax information from the government.
• This year roughly 10 million Americans will receive computerized notices from the IRS. About half of those will be erroneous.

"Go Ahead: Take My Pay!"
Problems Complying with the IRS

• We can't understand it. We don't even try. More than 50 percent of us use professional tax help, and this percentage is going up -- it was 40 percent in 1980.
• Even the professionals have problems. A few years ago, Money Magazine sent the same tax information for the same hypothetical family to 50 different preparers. It got 50 different answers. And none of them was right.
• People who call the IRS for tax help have only a 1 in 4 chance of getting through.
• Many people have simply lost confidence in the system; they've stopped paying taxes. In 1995, according to the GAO, Americans owed an estimated $100 billion more income tax than we actually paid. This tax gap is on the rise. In 1987 it was only $71 billion.
• Even Congress doesn't understand the tax laws. Sixty percent of the members of the Ways and Means Committee and the Senate Finance Committee don't do their own taxes, according to a Money Magazine survey.
• Congress gets free tax preparation services. The rest of us pay $30 billion a year for professional tax help.