The history of taxation dates back to time immemorial and it is not a recent development by any account. Further, the history of taxation suggests that the process of levying and the manner of tax collection were unorganized. Although, there were no homogeneous tax rate structures but it depended on the production capacity and commodity of that particular country and/or region. These taxes were collected in cash or in kind and it entirely depended on the type of commodity on which it was levied upon. This suggests these were done to store government buffer stocks to meet emergencies.

The Federal tax law code is administered primarily by the Internal Revenue Service, a bureau of the Treasury. The Code’s complexity generally arises from two factors: the use of the tax code for purposes other than raising revenue, and the feedback process of amending the code. While the main intent of the law is to provide revenue for the federal government, the tax code is frequently used for public policy reasons, i.e., to achieve social, economic, and political goals. Because the government uses the tax code as an instrument of social policy, the code as a whole appears to some critics to lack a coherent organizing principle.

The U.S. government rewards certain behavior with tax deductions or tax credits. For example, amounts used to pay mortgage interest on a personal home may be deductible, if the taxpayer elects to itemize. Taxpayers who do not participate in an employer-sponsored pension plan may contribute up to $4,000 ($5,000 if age 50 or above) into an individual retirement account, and deduct that contribution from their gross income if they fall within certain income limits. The Earned Income Tax Credit benefits low- to moderate-income working families. For businesses, a corporate expense account is treated under the tax code as either “accountable” or “unaccountable”.