The Year Of the Missing Federal Income Tax

1942 was the year of the 1942 revenue bill, perhaps the largest tax increase in American history.  Thirteen million more Americans would find themselves paying federal income tax.  This was out of a population of 130,000,000 and where, prior to the War, most families had only the father of the family as a breadwinner.  Only the War made such a radical expansion of the federal income tax politically feasible.  In 1943 wage withholding of taxes would begin.  The problem was that all of these new federal taxpayers would be trying to meet their 1942 tax obligations as their checks were being subject to federal income tax withholding, a train wreck in the making.  Beardsley Ruml, chairman of the New York Federal Reserve Bank and chairman of R.H. Macy and Co. hit upon an ingenious solution:  forgive the federal income tax owed for 1942!  Ruml compared it to daylight savings time, moving”the tax clock forward, and cost the Treasury nothing until Judgment Day.  One  wag completed the thought that on Judgment Day, “no one will give a damn.”  President Roosevelt was reluctant, viewing the forgiveness as a windfall to wealthy Americans used to paying income tax, but the idea was overwhelmingly, unsurprisingly popular in Congress and with the American people, and the tax debt for 1942 was duly forgiven.

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Published in: on April 18, 2016 at 5:30 am  Comments Off on The Year Of the Missing Federal Income Tax  
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