Another Tax Day has come and gone, and most Americans believe they pay too much. One recent poll revealed that 56 percent say they pay more than their fair share. Unfortunately, I fear this is just the beginning considering the insane level of debt Washington policymakers have accumulated over the years. With this in mind, here are some important facts about our tax system that you might not know.

The payroll tax is the heaviest burden for most taxpaying Americans, but the income tax is more visible and painful to a lot of people. While we are accustomed to it—and while it affects some Americans' decisions about how much to work, invest, or save—the income tax didn't exist for most of our country's life.

In 1895, the Supreme Court ruled against a direct tax on the incomes of American citizens and corporations, something that had been included in the previous year's Wilson-Gorman Tariff Act. The court found that such a tax violated the constitutional requirement that tax apportionments among the states be based on population. It took a constitutional amendment—the 16th—to eventually change that and pave the way for the modern income tax.

The very first Internal Revenue Service Form 1040, introduced in 1913 after the ratification of the 16th Amendment, was remarkably straightforward compared to what we know today. It was only four pages long, including instructions, and the top tax rate was 7 percent on incomes above $500,000, which is over $15 million in today's dollars. Some people were horrified by a 7 percent tax and warned that it could put us on a slippery slope to higher rates—maybe even above 10 percent (!)—imposed on a vast majority of people. They were called crazy for fearing such a thing.

And yet, as predicted by a few realists, the income tax rate not only increased, but the threshold at which it's applied went down. During the 1950s and the Eisenhower administration, the top marginal tax rate on incomes reached 91 percent for individuals. This rate applied to incomes over $200,000 (about $2 million today) for single filers and $400,000 (about $4 million today) for married couples filing jointly. These high taxes were part of a broader policy to manage post-war fiscal adjustments and fund federal programs. These rates also failed to raise as much money as you would think due to many loopholes in the tax code.

While the top marginal rate is much lower today, the income tax code remains remarkably complicated. Will McBride, a scholar at the Tax Foundation, recently wrote that "as of 2021, the U.S. income tax code was 4.3 million words long and growing. That's much longer, and presumably much more complicated, than tax codes found in other countries." There are several reasons for this.

First, many welfare programs are administered through the tax code. In recent testimony before the Senate Budget Committee, the Cato Institute's Chris Edwards wrote, "The tax code is an increasing mess. The number of official tax expenditures has risen from 53 in 1970 to 205 today, making IRS administration and enforcement ever more difficult. We know from experience that complex tax expenditures, such as the low-income housing tax credit and earned income tax credit, generate substantial errors and abuse."

In addition, contrary to common belief, the U.S. income tax system is actually quite progressive. According to the Tax Foundation, "though the top 1 percent of taxpayers earn 19.7 percent of total adjusted gross income, they pay 37.3 percent of all income taxes. Just 3 percent of taxes are paid by the lowest half of income earners." Maintaining this progressivity through all kinds of tax provisions increases the complexity of the code.

This progressivity is generally ignored by those who argue that taxing the rich is the solution to reducing the burgeoning U.S. national debt. Soaking the rich, while perhaps appealing in its simplicity, misses the scale of the problem. Brian Riedl, a Manhattan Institute senior fellow, noted that if we were to confiscate 100 percent of the income of everyone making over $500,000 per year, it would fund the government for less than a year. This puts into perspective the enormity of the $34 trillion national debt versus the income of the rich.

Taxing the rich is a convenient distraction hiding the reality that if spending isn't cut, taxes will have to be raised on everyone, a lot. On this tax week, I suggest Congress starts cutting.

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The post This Tax Week, Remember That the Federal Income Tax Is Relatively New appeared first on Reason.com.

The Securities and Exchange Commission (SEC) has gone rogue. The commission has now finalized a rule that will bully publicly traded companies into reporting environmental information that has no relevance to the financial concerns that matter to investors. As much as environmental activists may want this information to shame companies into embracing their political agenda, it is not the SEC's role to demand financially irrelevant disclosures—much less to demand companies speak on political and social issues like climate change.  

The SEC's new rule requires companies to give a public accounting of their annual greenhouse gas emissions. Still worse, the rule strong-arms companies into telling the public whether they are taking steps to combat climate change and forces companies to hazard guesses about how climate change might affect their operations far into the future. But none of that has anything to do with the SEC's statutory mission of helping investors understand the financial risks and rewards of investment. 

The SEC was established to regulate public companies in the wake of the financial crisis that triggered the Great Depression. Toward that end, the law requires companies to disclose to investors "material information…as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading." For example, companies must provide information about market volatility, pending lawsuits, and significant management changes, because that type of information could affect a company's financial performance.

Disclosures about whether a company is prioritizing climate change concerns are categorically different from the sort of disclosures the SEC has long required, for at least two reasons. First, the new rule requires disclosures across the board from all large companies. That's a marked departure from the "facts and circumstances" test the SEC has long employed, which requires information that could affect the financial performance of individual companies, not environmental or social conditions.

With its extraordinary unpredictability, and a time horizon crossing decades, climate change's impact on any given company is practically impossible to assess. Requiring disclosure of greenhouse gases thus tells investors nothing relevant to a company's financial situation; it will lead to baseless speculation and reams of information that investors cannot possibly apply to investment decisions now.

Of course, none of this is news to supporters of the rule. Their goal is not to inform investors, but to bludgeon companies into toeing the climate change line. The new rule has nothing to do with financial considerations and everything to do with political considerations. As SEC Commissioner Mark Uyeda declared in dissent, "shareholders will be footing [the] bill" to institutionalize an ESG department in every publicly traded corporation in America. 

The SEC's power grab is unprecedented and dangerous. While some investors may care about greenhouse gas emissions, their desires do not justify compelling companies to make disclosures about whether they are prioritizing climate change concerns. If that low bar could trigger SEC regulation, there would be no end to the subjects the agency could require companies to report, including their positions on abortion, gay marriage, and immigration. But forcing companies to parrot the party line on the environment is not the SEC's job.

If the SEC is going to be transformed into the environmental and social thought police, that decision must come from Congress. Our Constitution empowers only Congress to make the law—and, importantly, to take responsibility for the consequences. As SEC Commissioner Hester Peirce stated, "Wading into non-economic issues involves tradeoffs that only our nation's elected representatives have the authority and expertise to make."

The consequences of the greenhouse gas rule are grave. It will fundamentally alter the SEC's mission. It will force companies to play a larger role in politics—something that neither the major political parties nor most companies seem to want. By peppering investors with irrelevant information, it will make them less informed about what actually matters. It will divert companies from their core purpose of maximizing shareholder wealth and creating products that increase everyone's standard of living. And it will violate the First Amendment by compelling companies to disclose information that is not intrinsically linked to their financial performance.

Pacific Legal Foundation, where we work, will file a lawsuit against the SEC in the coming days to block enforcement of this rule and vindicate constitutional principles. Here's hoping that the courts will not allow this rule to stand.

The post The SEC Conscripts Corporate America in Its New Climate Change Fight appeared first on Reason.com.