The History Of Income Tax

They say death and taxes are the only two certain things in life. However, this wasn’t always the case. Well, at least when it comes to the income tax.

The History of Income Taxes 

The United States came into existence in fits and starts.  After the revolt against the British, a federal government was elected in our country and the fun began from that point on.  This “fun” unavoidably initiated the situation where not everybody could agree on what the United States should stand for, much less what laws should be enacted.  Because of this, there was no federal income tax for almost one hundred years.  Now... those were the good ole days! 

You are probably wondering...but how did the government even operated with no income tax during this time?  It did so by collecting use and sales taxes.  Taxes were charged on liquor, tobacco and imports just to name a few.  Many people today would like to back and use this type of system.   

In contrast to popular notions, the first income tax was not put into law in the early 1900’s.  In fact, the first President to institute an income tax was Abraham Lincoln.  In 1861, President Lincoln and Congress passed an income tax law to help fund the Civil War with the south.  When the war ended, the tax was phased out.  Can you imagine a tax being phased out now?  This would bring a tear of laughter to your eye.   

The income tax, as we know it, was first established in 1913.  Congress passed a law which instituted a graduated tax rate of one to seven percent on all income taxes.  I can say honestly and truthfully that I would kill to pay 1% in taxes these days.  Heck, I am even willing to take on the trouble of paying seven percent!   

When creating the income tax system, the United States Constitution was amended to add a 16th Amendment.  This Amendment gave the federal government the right to collect taxes.  The politicians principally responsible for this were President Roosevelt and President Taft.  The reason I mention two Presidents is because the bitter debate over the subject took a long time to work out. 

If you’re looking to blame a particular political party, Presidents Roosevelt and Taft were both Republicans, but the Democrats haven’t made much of an effort to repeal the tax either, so both parties are basically accountable for the income tax system.    So there you have it.  This is the history of how income tax became part in the United States.