When Did Congress Start Income Taxes?
The income tax is much despised by Americans. You might be surprised to know these taxes were not always collected. So, when did Congress start income taxes?
The common conception of government is that it collects taxes and then pays them out to provide for Americans in one form or another for things such as the military, Medicare, Social Security and so on. In truth, the original form of government did not collect income taxes in any forms. Instead, the government was much smaller and ran off of moneys collected in fees and tariffs from imports.
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It took a major historical event to change things. The event in question was the American Civil War. The government needed money to arm and fight the secessionist in the South. The first income tax was passed by Congress on August 5, 1861. It was known as a the Revenue Act of 1861. The tax was for three percent of the earnings of every American on earnings over $800. In 1861, that was a relatively small pool of people. Given the above, Congress appears to have started income tax in 1861, but then again maybe not. Huh? Well, Congress went ahead and repealed the income tax at the end of the war.
There was no income tax following the war and for decades after that. So, how did we get into our current mess? The change occurred once there was a major alteration in the way tariffs were collected on imports, to wit, they were lowered. Income taxes were instituted in 1894 to make up the difference under a law known as the Wilson-Gorman Tariff. It equated to a tax of 2 percent on earnings over $4,000, which meant roughly 10 percent of the population paid.
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As you might imagine, the income tax was not exactly an exciting prospect for a lot of people. It was challenged in court and eventually the Supreme Court heard the matter. It ruled that part of the tax was constitutional, but part was not. This led to a practical problem with collecting taxes and the issue became a political one. Eventually, the 16th Amendment to the Constitution was ratified in 1913 and gave the government the ability to place an income tax on citizens, an event that has occurred ever since then.