Bay Area Estate And Tax Planning Law Firm

The federal income tax hits its 100 year anniversary

On Behalf of | Oct 3, 2013 | Uncategorized |

A lot of California readers probably don’t realize that there was a time in the United States when there was no federal income tax. The first instance of an income tax was during the Civil War when the government needed more revenue to continue fighting. That was a temporary tax that eventually expired, leaving the government to raise funds solely from tariffs from trade and excise taxes, as was the case before the war.

Interestingly enough, the tax debate in the 19th century was much the same as it is today, with advocates for the income tax arguing that use-based taxes (excise taxes) burdened the poor too heavily and that another source of revenue was needed to even the scales.

The first attempt at a non-temporary income tax was a flat tax at a rate of two percent, but that tax was eventually declared unconstitutional by the Supreme Court. 19 years later in 1913 the 16th Amendment was passed, making the federal income tax enshrined in the constitution itself.

The Internal Revenue Service (IRS) was eventually established to help administer the income tax and make sure that everyone paid on time and in the correct amount. 

Then as now, almost as immediately as income tax laws were passed, so too were loopholes encoded into the law. And as is the case today, throughout history there have always been advocates seeing to abolish the federal income tax entirely. However, it is most likely that after 100 years of a pillar of our revenue system, the income tax is here to stay.

Source: New York Times, “Happy Centennial, Federal Income Tax,” Bruse Bartlett, Oct. 1, 2013. 

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