Profits and the tax codes
So The Legal Genealogist was talking about taxes yesterday, in the Legacy Family Tree webinar “A Taxing Matter: Using Tax Lists in Genealogy,” and one term seemed to give some folks some problems.The term: profits.
And the problem was that profits were in fact included in early tax codes.
The term, as defined by the law dictionaries, has pretty much the same meaning we’d all expect, and Black’s Law Dictionary even cites the Webster dictionary definition: “The advance in the price of goods sold beyond the cost of purchase. The gain made by the sale of produce or manufactures, after deducting the value of the labor, materials, rents, and all expenses, together with the interest of the capital employed. Webster.”1
And, the definition goes on: “The usual, ordinary, and correct meaning of the word ‘profits’ is the excess of receipts over expenditures; that is, net earnings.”2
But waitaminute waitaminute waitaminute.
That sounds like an income tax, doesn’t it?
And we didn’t have an income tax until the ratification of the 16th Amendment in 1913,3 right?
Um… not exactly.
The fact is, the tax man has tried to wrap his paws around incomes for a very long time — and sometimes succeeded long before we ever had a 16th amendment.
Start with the fact that places like the Massachusetts Bay Colony were taxing incomes as far back as 1646, with a law that provided that
… all such persons as by the advantage of their arts and trades, are more enabled to help bear the publick charge than common labourers and workmen, as butchers, bakers, brewers, victualers, smiths, carpenters, taylors, shoemakers, joiners, barbers, millers, and masons, with all other manual persons and artists, such are to be rated for returns and gains, proportionable unto other men for the produce of their estates…4
Later colonies and states also imposed what were called faculty taxes, and these differed from income taxes mostly in the way they were assessed. True income taxes look just at what somebody actually earns; the faculty taxes were estimated based on what the assessor thought the person should be earning considering his or her abilities, trade and actual assets.5
You’ll see these taxes imposed throughout New England in the colonial period, and similar laws passed by states during and after the Revolution.
In South Carolina, the law imposed taxes on profits starting in 1701:
The original law of 1701 was changed in 1703 so as to apply to “estates, goods, merchandise, stocks, abilities, offices and places of profit.” In 1758 the law was changed so as to require store-keepers, as well as physicians and surgeons to be taxed “for their stock and trade and the profits of their professions at the rate of eighteen shillings for every one hundred pounds (0.9%) upon the full value of their profits.” In 1760 the law was again amended so as to provide for a tax of “six pence per cent” (2-1/2%), “on the profits of all faculties, professions (except the clergy) factorage and handicraft trades throughout the province to be ascertained and rated by the several assessors and collectors according to the best of their knowledge and information.”6
And in Virginia, a law passed in 1777 required tax assessors to collect a statement from every taxable resident of the amount received in interest, quitrents and salaries, and taxed those amounts.7
Even the feds began taxing incomes before that 16th amendment date. In 1861, as the Civil War began to take its financial toll as well as its toll of men and matériel, Congress enacted and President Lincoln signed the very first federal income tax law — imposing a tax of three percent on incomes over $800 a year.8
That federal law, by the way, taxed a whole lot more than incomes, and created a truly wonderful set of records that have been digitized and are readily available online. Take a gander, if you haven’t already, at the collections entitled “United States Internal Revenue Assessment Lists, 1862-1874” at FamilySearch and “U.S. IRS Tax Assessment Lists, 1862-1918” at Ancestry.
So yeah, really, taxes on profits… or incomes, if you prefer… long before the 16th amendment.
Image: The 16th Amendment, National Archives, Washington, D.C.
- Henry Campbell Black, A Dictionary of Law (St. Paul, Minn. : West, 1891), 951, “profits.” ↩
- Ibid. ↩
- See U.S. Constitution, 16th Amendment, Legal Information Institute, Cornell Law School (https://www.law.cornell.edu/ : accessed 10 Aug 2017). ↩
- §3, Chapter XXI, “Acts Respecting Charges, Publick Rates, &c.,” in The Charters and General Laws of the Colony and Province of Massachusetts Bay (Boston : T. B,. Wait & Co., 1814), 70; digital images, Google Books (http://books.google.com : accessed 10 Aug 2017). ↩
- See K.K. Kennan, Income Taxation, Methods and Results in Various Countries (Milwaukee, Wisc. : Burdick & Allen, 1910), 204-204; digital images, Google Books (http://books.google.com : accessed 10 Aug 2017). ↩
- Ibid., 209. ↩
- Chapter II, Laws of 1777, in William Waller Hening, The Statutes at Large … of Virginia… (Richmond: p.p., 1821), 9:350. ↩
- §49, “An Act to provide increased Revenue from Imports, to pay Interest on the Public Debt, and for other Purposes,” 12 Stat. 292, 309 (5 Aug 1861). ↩
Giggle. You used the phrase “take a gander” two days in a row.
What can I say? I like the phrase…
-Has the National Archives indicated how and on what schedule IRS tax returns starting in 1913 will be retired to the Archives?
-There are fragments of the 1798 Federal Direct Tax you mentioned for nearly all the states. They are just the devil to find. I have relatives in all 3 surviving Georgia counties.
-The early Georgia tax rolls have Quality I, II, and III land. Any sources around that would define how these were determined? I am searching the 1804 tax legislation but it only refers to the rates for each Quality category and not a definition. No instructions for tax collectors have been located. I will continue to search the legislation and the GA Secretary of State land website.