In 2024, Americans will pay a federal income tax that ranges from 10%-37% of one’s income. This is a continuation of a federal income tax tradition that started about 160 years ago at the beginning of the Civil War.
The Revenue Act of 1961 was signed by President Abraham Lincoln on August 5, 1861. At the outset of the Civil War, Lincoln knew that the Union needed money to finance the war. The United States Treasurer at the time, Salmon Chase, told President Lincoln that they would need $320 million (about $11.5 billion today) to win the war against the Confederacy. The Union was able to borrow or sell public land to obtain $300 million of it. President Lincoln had to figure out how to raise the remining $20 million. Thus, the idea for an income tax was born.
The resulting revenue bill, drawn up by the House Ways and Means Committee, imposed an import and land tax as well as a 3% tax on those making at least $800 annually (about $18,000 today). In the end, this was not an extremely effective means of raising money. The Union didn’t have a great way to track and collect taxes, and most people living in the Union weren’t making enough money to fall into the taxable bracket. The next year, in 1862, the law was changed and the first graduated income tax was passed. This tax was 3% for those making between $600 and $10,000 and 5% on anything greater. This bill also established the Internal Revenue Service (IRS) as a means of enforcing the tax law.
In 1872, ten years later, the income tax bill was repealed. Over the next 40 years, Congress tried several times to pass something similar to the original revenue bills but had no luck. In 1913, Congress proposed the 16th Amendment, which reads that “Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”
Learn more here:
- https://constitutioncenter.org/blog/say-happy-birthday-to-the-first-income-tax
- https://www.battlefields.org/learn/articles/first-income-tax
- https://www.archives.gov/milestone-documents/16th-amendment
- https://constitution.congress.gov/constitution/amendment-16/#:~:text=The%20Congress%20shall%20have%20power,to%20any%20census%20or%20enumeration.
