The History of the United States Income Tax
Before the year 1913, America was a graced by very few taxes. During the first years of America’s existence, taxes were only placed on items like tobacco, spirits, property and slaves. Soon after, America experienced its first sales taxes – mostly on luxury items like jewelry, after the high costs of the War of 1812 created a need for more internal revenue. Several years later, following the war, America switched to a tariff system and no longer collected taxes at all. This “taxless” period lasted for 44 years, starting in 1817.
The predecessor to today’s income tax was born when congress passed the Revenue act of 1861. The Revenue Act was intended to generate revenue to fund the Civil War effort. It featured the first ever taxes on American’s personal income, as sales taxes and other various taxes. 10 years later, the Revenue act was repealed and America reverted back to a flat tax which was short lived, being ruled unconstitutional only one year later.
In 1913, one month before Woodrow Wilson took office as President of the United States, the 16th Amendment to the Constitution was ratified and the Federal Income tax became a permanent part of the American tax. Congress now had the legal authority to tax the income of both individuals and businesses. One of the main reasons for establishing the income tax was to promote free trade by reducing tariffs and duties. The federal government wasted no time and began collecting income taxes later in the same year. 5 years later, America’s tax revenue exceeded 1 billon dollars for the first time, and it has continued to steadily increase ever since. During the second World War, America established the withholding tax on wages, which dramatically increased the total number of US citizens paying taxes. By 1945 annual US tax collections had reached a whopping $45 billion.
In 1913, the original income tax filing date established by the US congress was actually March 1st. Five years later, the filing date was changed to March 15th where it stayed until 1954, when finally it was pushed back one month to April 15th.
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