Who and what should be taxed?
On February 14, 1929, in a garage on Chicago’s north side, a crime was committed that would shock the nation. Seven men-all but one of whom were members of an organized crime gang-were brutally gunned down by members of a rival gang dressed as police officers. The killings, which made headlines all over the country, were dubbed the Saint Valentine’s Day Massacre.
The man believed to have been behind the massacre was Al Capone. one of the most notorious gangsters in American history. Capone, who went by the sinister nickname “ Scarface,” was a Chicago mob boss during the Prohibition era of the 1920s. At the time, the sale of alcohol was banned by the Eighteenth Amendment. Capone made a fortune from the illegal liquor trade, gambling, and other criminal activities. By ruthlessly eliminating his rivals, Capone rose to the top of Chicago’s criminal world. Federal law enforcement agents, led by Eliot Ness, tried for years to arrest him on murder and racketeering charges. But Capone was slippery-he always had an alibi. In addition, no one was willing to testify against him. Then, in 1930, a key piece of evidence was found during a routine warehouse raid. Finally, federal prosecutors were able to bring their man to justice. Al Capone — the man branded “ Public Enemy Number One” — was charged with the crime of ... tax evasion. Every year, millions of Americans have to fill out forms like these to pay taxes to the government.
For several years in the late 1920s, Capone had failed to pay income tax. Yet he lived like a king, spending extravagantly on cars, clothes, and other luxuries. The Justice Department knew that such lavish spending was a sign of substantial income,
but they could not prove it until they found a coded set of accounts that belonged to Capone. When they filed charges, Capone is said to have responded, “ The income tax law is a lot of bunk. The government can’t collect legal taxes from illegal money.” But Capone was wrong. In 1931, he was convicted of tax evasion and sentenced to 11 years in prison. He was also forced to pay S80,000 in fines and court costs. and his career as a mobster was over. Capone learned the hard way the truth of Benjamin Franklin’s famous saying, “ In this world nothing is certain but death and taxes.” By comparing taxes to the one truly inevitable event in life — death — Franklin was saying that taxes are an unavoidable consequence of living in soc iety. In this chapter, you will learn about taxes and how they arc used to finance government operations. You will read about the various types of taxes and how they arc collected and spent by governments at” the local, state, and national levels.