The History of the Income Tax
The federal progressive income tax has been an issue that has been argued on the floors of Congress, in front of the United States Supreme Court, in front of television cameras, and around the dinner table. The tax served its purpose in supplementing revenue during the Civil War and World War I, but continued taking from Americans' income in peacetime, allowing fewer dollars to be spent on goods and services. When the American government was in a deficit, it was harder to argue for the abolishment of the income tax, but now that Congress is looking at a government surplus for the first time in decades, the question is raised again: Do we have to have a progressive federal income tax? Prior to the Civil War, the vast majority of government funds came from tariffs on imports. The only exception was during the War of 1812, when blockades by the British, as well as the war being with the young country's number one trade partner, lowered income from tariffs. Government revenues were accompanied by funds from the sale of public lands, such as the Louisiana Territory and the Oregon Country, as well as excise taxes, which were introduced during the War of 1812 (Hansen 62). As Abraham Lincoln, who once said "t
But instead of rates being decreased due to the end of the war, the Senate amended the bill with a maximum rate of 77 percent (Witte 85-86). After the defeat, which was referred to as "the Dred Scott decision of government revenue" (Seligman 589) and made newspapers from coast to coast, the income tax died Slocum 5 down for over a decade, with the lone exception occurring during the Spanish-American War, when an income tax on corporations was submitted to Congress as a way to pay for the war effort. By 1862, the tax was altered by setting progressive rates "at three percent on incomes between $600 and $10,000; five percent between $10,000 and $50,000; and 7. The panic lowered government Slocum 4 revenues and soon eliminated existing surpluses. Charles Evans Hughes, the governor of New York and future Chief Justice of the Supreme Court, argued feverishly against it, saying that the federal government would gain the power to tax state and municipal bonds, but New York passed the amendment on its second try. Radicals suggested a progressive structure that drastically lowered the minimum income to tax as well as taxing all incomes over $100,000 a year at 100 percent, effectively making the maximum income in the country $100,000 annually. Rates fell in the 1920s according to the following table: Income 1918 (%) 1921 (%) 1924 (%) 1926 (%) $2,000 6 4 2 1. Cries for the return of the income tax continued inside and outside of government, but efforts were voted down by the Republican majority in Congress, saying that additional revenue was not needed due to already existing surpluses in the budget. Looking at taxation today, there are similarities to the post-WWI pre-depression period. hat he had no money sense and never enough money to fret him, came into office with a national debt of nearly $75 million and Slocum 2 little to no inflow of customs duties, as well as an outflow of investments to foreign countries by investors who feared war.
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