October 5, 2013
100th Anniversary of the US Income Tax
About 100 years ago in 1913 Congress and the states approved the 16th amendment to the US constitution which created the US income tax. Prior to that the US Supreme Court had held that the income tax was not Constitutional.
In 1913, the tax code consisted of 400 pages, but by 2012 the tax code was over 73,608 pages. The US has gone form a simple system to a very complex unfriendly system.
But having some sort of taxation goes back to the country's beginning. From 1791 to 1802, the government was supported by tax revenue from the sale of such items as liquor, tobacco, sugar, property sold at auction and even through the sale of slaves.
The high cost of the War of 1812 saw the first sales tax on gold, silverware, jewelry and watches. But by 1817, Congress eliminated all taxes and relied on tariffs from imported goods for revenues.
It was in 1862, to fund the Civil War, that Congress enacted the first income tax. Anyone making between $300 to $10,000 a year paid a rate of 3 percent. That tax ended soon after the war.
Congress also established the Internal Revenue Service at the same time, which had much the same power and authority then as it does now.
Jumping to 1894, Congress passed the first peacetime income tax law, but a year later the Supreme Court declared it unconstitutional. The court said that taxes on rents and real estate income had to be divided among the states according to population, which the law did not allow.
But the court did make a crucial statement in its ruling. It said that Congress had the right to impose a direct income tax—and that led to the passage of the 16th Amendment on October 4, 1913.