Tuesday, July 05, 2011

PolitiFlub: Obama & tax rates on hedge fund managers, Pt. 2

The flub (yellow highlights added):
We realize that Obama offered two different standards -- the lowest rates ever, and the lowest since the 1950s. We’ve decided to use the latter standard -- "since the 1950s" -- because the data is more consistent and easily accessible. (With one exception to fund the Civil War, there was no federal taxation prior to 1913.)
Yes, it's snarky to turn PolitiFact's own poor approach to fact checking against it.  PolitiFact earned such treatment, however.

There was, in fact, federal taxation prior to 1913 apart from a wartime exception during the Civil War:
From 1791 to 1802, the United States government was supported by internal taxes on distilled spirits, carriages, refined sugar, tobacco and snuff, property sold at auction, corporate bonds, and slaves. The high cost of the War of 1812 brought about the nation's first sales taxes on gold, silverware, jewelry, and watches. In 1817, however, Congress did away with all internal taxes, relying on tariffs on imported goods to provide sufficient funds for running the government.
infoplease.com
Of course, folks at PolitiFact almost certainly meant "federal tax on income" rather than "federal taxation," but that's not what they said.  And even if we give PolitiFact the charitable interpretation it so often denies to others, they're leaving out a few things:
[8] In 1894, another federal income tax was enacted, but it was declared unconstitutional by the Supreme Court in 1895, on the ground that it was a direct tax not apportioned among the states by population.

[9] Excise tax rates were increased and new excises 2 imposed along with the imposition of an inheritance tax to help finance the Spanish-American War. These excise taxes were mostly repealed by 1902. The low revenue-yielding inheritance tax continued a few years longer.

[10] The Act of 1909 imposed a corporate excise tax of 1% on corporate net income over $5,000. Four years later, the Sixteenth Amendment (ratified on February 25, 1913) provided that "Congress shall have the power to lay and collect taxes on incomes, from whatever source derived without apportionment among the several states and without regard to any census or enumeration." 
Congressional Research Service report, hosted at taxhistory.org

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