Happy Income Tax Day.

On this day in 1913, the Sixteenth Amendment to the United States Constitution was ratified, granting the United States Government the authority for a Federal Income Tax not “apportioned” based on census numbers.

In the War of 1812 an in come tax was proposed but never implemented.  It was during the Civil War that the first Federal income tax was actually implemented, first a flat tax of 3% on incomes above $800, then a graduated tax of 3 to 5% on income above $600 (about $13990 today).  These taxes expired in 1872.

In the decades following the expiration of the Civil War taxes, a number of parties looked at the amount of money they generated and said figuratively “I’ve got to get me some of that.”  The Socialist Labor Party, the Populist Party, and the Democrat Party all advocated income taxes

In 1894, as an Amendment was attached to a tariff act instituting an income tax of 2% on incomes over $4000 (about $111,133 today).  However, in 1895, in the case “Pollack vs. Farmers’ Loan and Trust” declared some of those taxes to be direct taxes unconstitutional because they were not apportioned.

This, of course, could not be born by those in Washington who wanted their hands in Americans’ pockets.  So in 1909, William Howard Taft proposed a Constitutional Amendment to make those taxes Constitutional.  And on July 12 of that year, the resolution to adopt such an amendment passed Congress.

One by one, States began ratifying the Amendment, starting with Alabama on August 10, 1909, until finally Delaware became the 36th state to Ratify it on Feb 23, 1913 putting it over the 3/4 of State Legislatures requirement for it to become part of the United States Constitution.

In doing so, this removed the precedent set by the Pollack decision.  It was reviewed again and overruled.

The Revenue act of 1913 reimposed the Federal Income tax.  It imposed a 1% tax on couples making more than $4000 ($99,664 today) or single individuals making more than $3000 ($74,748 today).  At higher incomes an additional tax was also imposed, culminating in a maximum rate of 7%.

From such small beginnings has the huge morass of the modern tax code grown.

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