Allan Rolnick, CPA
Why did the rocket scientists who designed the space shuttle choose to make its solid rocket boosters smaller than they really wanted? Because those boosters would have to be shipped by train from the factory to the launch site and pass through a tunnel that was barely wider than a standard gauge railroad track. Why is it that the standard gauge is four feet, 8.5 inches wide? Because that’s how the first railroad engineers built them in England. Why did those engineers choose that width? Well, because it was the standard gauge for wagon tramways. So why were the original wagon tramways four feet, 8.5 inches apart? Because that was the standard spacing for the wagon wheels themselves. And why did the wagons themselves use that spacing? Because that’s how wide the wheel ruts were in the old English long-distance roads. Why were the ruts in the road that far apart? Because they were originally built for Roman war chariots. OK, so why were the chariots built to that particular width? Because it was just wide enough to accommodate two horses. Now that you know that space travel is based at least in part on the width of an ancient Roman horse’s bottom, you might be wondering whether the taxes you pay are based on similar historical reasons. (It’s OK if you weren’t.) Turns out that the answer is yes. The oldest historical tax records date back to around 6,000 BC, from the citystate of Lagash, located in present-day Iraq. Tax assessors worked in different areas of the city-state for a month at a time, breaking down collections into a manageable task. Taxes themselves were generally low, except in times of war when they shot up to 10% of whatever food residents produced. A thousand years later, in Egypt, Pharaohs collected the equivalent of 20% of the grain harvest. Interestingly (at least to tax nerds like us), the Rosetta Stone, which archaeologists used to unlock the secrets of hieroglyphics, was inscribed to explain how Ptolomy granted temples tax-exempt status.
True income taxes didn’t evolve until we had money-based economies. (How do you collect 10% of those giant round stones the Yap islanders used as money?) In 10 AD, Chinese emperor Wang Mang imposed a 10% income tax on professionals and skilled laborers. (He was overthrown 13 years later. Coincidence?) And in 1188, King Henry II imposed the “Saladin tithe” of 10% to pay for the Third Crusade. But it wasn’t until 1799 that England introduced the first modern income tax, which started at “two old pence in the pound” (1/120) on incomes over £60. Abraham Lincoln introduced the first American version, starting at 3% on income over $600. William Faulkner once wrote that, “The past is never dead. It’s not even past.” Today’s governments have plenty of historic ways to raise revenue: income taxes, property taxes, tariffs, and sales taxes. They’ve got newer value-added taxes, wealth taxes, carbon taxes, and excise taxes on specific goods. And in a couple of weeks, we’re going to use the 40th anniversary of a classic American film to discuss an even newer tax proposal that could revolutionize how we all travel. The good news is that at least taxes evolve over time. Just six years ago, Washington passed a law that tightened itemized deductions but created a whole new category of qualified business income. Most tax pros learn those changes to calculate how much you owe under the new rules. But we learn them to help you use them to pay less. Sadly, we’ll probably be doing that until the end of history!
Allan J Rolnick is a CPA who has been in practice for over 30 years in Queens, NY. He welcomes your comments and can be reached at 718-896-8715 or at firstname.lastname@example.org.