People hate taxes as much as governments love them. The tax-man has troubled people throughout history, starting over 3,000 years ago.

TUTORIAL: Economics Basics

Paying for Pyramids
One of the earliest records of taxes comes from the ancient Egyptians, found on the Egyptian slates that have weathered time well. However, some form of public taxation probably started with the first human tribes. In Egypt, it was simply a matter of someone having to pay for all those pyramids. The tax was collected in two forms: the pharaoh would take a fifth of the agricultural proceeds from the farmers within his kingdom and, in addition to this 20% tax, many Egyptians were required to enter the public service during lulls in the growing season.

The Power of Coin
The advent of money allowed people to pay taxes with something other than their produce or labor. Many ancient empires had a tax system of scutage, a monetary amount paid by the wealthy in lieu of military service. Alexander the Great established taxation in Macedonia by demanding regular tributes from defeated enemies. By the time of the Romans, temples had long been in the practice of requiring donations from members - a practice that would grow into the tithing system, in which Christians were requested to give one-tenth of their incomes to the church. These levies, however, were not quite taxes as we think of them today. Modern taxes really began to take shape when the European monarchies consolidated power and developed nation-states. (To read more about the history of money, see Cold Hard Cash Wars and From Barter To Banknotes.)

A Beast is Born
From the 1400s to the 1800s, monarchies had been trying to cement their hereditary powers even as the people were seeking freedom. Somewhere along the way, both parties got distracted and the beast known as the government snook in. Failing to give the people freedom or the king ultimate power, the government still persisted because of two merits: it was extremely good at expanding itself, and it was even better at attacking other governments. Monarchs were no slouches in the war-mongering department, being quick to send their subjects to die to defend their slighted honor, but governments attacked each other incessantly. The frequency and scope of war increased drastically during this time.

Like the pyramids before them, someone had to pay for the rulers' whims and excesses. Because the fate of the nation was at stake, the government made sure it received all the taxes due unto it. This meant employing an infrastructure of lawyers, tax collectors and others whose wages required more taxes to support themselves. These self-perpetuating agencies helped to centralize the government and solidify national borders. The governments pushed aside the monarchies and started looking across the oceans for new lands to start invading or trading with.

The formation of nations opened the door to international trade and mercantilism, but the governments quickly found locks to keep their new neighbors out. Tariffs flew fast and thick through the various parliaments of nations trying to tweak the balance of trade in their favor. If another nation tariffed your goods while you were passing your own tariffs on theirs, then it was cause for more war and more taxes. Many governments would borrow heavily from banks or issue bonds, and then seek to make good on their debts through the tariffs or tribute from conquered foes. When this failed, they turned to income tax.

In 1799, the British Parliament enacted its first income tax to raise funds to fight off Napoleon. Napoleon caused tax increases with every victory. Even when Napoleon was defeated and exiled, the impact of his campaigns could be traced by the adoption of extra taxes by many European nations. Once the revenue started flowing in, the profiting governments were in no rush to get rid of these taxes.

The Bottom Line
Whether to fund an Egyptian pharoah's tomb, a medieval monarch's conflict or European nations entangled in a complex system of treaties and wars, taxes have burdened people for well over a millennia. Taxes have motivated people to find alternate ways of recouping their deducted wages. It could even be said that investing was created partially as a reaction to taxes.

Since most world economies would fall quickly without some form of taxation, it doesn't look like governments will stop collecting anytime soon. Fortunately, much of this revenue is now spent for public benefit.

Related Articles
  1. Taxes

    Why People Renounce Their U.S Citizenship

    This year, the highest number of Americans ever took the irrevocable step of giving up their citizenship. Here's why.
  2. Taxes

    Taxes: H&R Block Vs. TurboTax Vs. Jackson Hewitt

    There are more and more tax services to help ease the pain of filing income taxes. Here's our take on three of the biggest.
  3. Taxes

    Confused About Estimated Tax Deadlines for 2016?

    If you run a business or have investment income, pay attention to this year's estimated tax deadlines. Here are the details, and what's new for 2016.
  4. Retirement

    Retirement Plan Tax Prep Checklist

    Here's a list of items you need to have in order by tax time, including paying attention to those pesky required minimum distributions.
  5. Economics

    How Powerful Is The IRS?

    Historically, the IRS has wielded formidable power, and that power isn’t likely to diminish anytime soon.
  6. Taxes

    Avoid the Social Security Tax Trap

    Government benefits can cost you big money! Know the income thresholds before you file.
  7. Investing Basics

    Understanding How Oil Companies Pay Taxes

    Read about how big oil corporations pay taxes, and learn about tax exemptions and the option to defer. Discover the argument about big oil being given tax exemptions
  8. Savings

    Explaining Tax Returns

    A tax return is the form or forms used to file income taxes with the IRS.
  9. Taxes

    How Does the Withholding Allowance Work?

    A withholding allowance is an exemption employees claim that reduces the income tax withheld from their paychecks.
  10. Taxes

    Understanding the Widow’s Exemption

    A widow’s exemption generally refers to the amount a widow can deduct from her taxable income to reduce her tax burden.
  1. When should my tax refund arrive?

    More than 90% of income-tax refunds arrive in less than three weeks, according to the Internal Revenue Service (IRS). However, ... Read Full Answer >>
  2. How do I file taxes for income from foreign sources?

    If you are a U.S. citizen or resident alien, your income (except for amounts exempt under federal law), including that which ... Read Full Answer >>
  3. Are Flexible Spending Account (FSA) items tax deductible?

    Flexible Spending Accounts (FSAs) are employer-sponsored, tax-favored savings plans expressly for the future reimbursement ... Read Full Answer >>
  4. How Long Should I Keep My Tax Records?

    The Internal Revenue Service (IRS) has some hard and fast rules regarding how long taxpayers should keep their tax records. As ... Read Full Answer >>
  5. Do tax brackets include Social Security?

    A portion of your Social Security benefits may be subject to federal taxation using tax brackets. Your tax bracket is determined ... Read Full Answer >>
  6. Do 401k contributions reduce AGI and/or MAGI?

    Traditional 401(k) contributions effectively reduce both adjusted gross income (AGI) and modified adjusted gross income (MAGI). ... Read Full Answer >>
Trading Center