With the adoption of the Sixteenth Amendment in 1913, Congress was granted the power to collect income taxes from the people. However, the history of the federal income tax begins decades before then. Here’s an overview of some key events in the history of the federal income tax.
On August 5, 1861, Abraham Lincoln signed the first federal income tax into law: the Revenue Act. The law came about during the Civil War, when the federal government found itself in need of funds to continue their war effort against the Confederacy. The act imposed a three-percent income tax on all annual incomes over $800.
Although Congress repealed the tax in 1872, the federal income tax would return soon thereafter.
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Championed by Representative WIlliam Wilson and Senator Arthur Gorman, this law imposed a two-percent tax on all incomes greater than $4,000. The measure impacted less than ten-percent of the nation’s households.
In this case, the Supreme Court struck down sections of the Wilson-Gorman Tariff Act that imposed income taxes on the American people.
The Court explained that Article I, Section 9 of the Constitution forbade Congress from imposing a direct tax. Therefore, the federal income tax was unconstitutional.
With World War I looming, the Sixteenth Amendment to the Constitution is adopted. The Amendment explicitly grants Congress the power to collect income taxes.
Under President Eisenhower, the Bureau of Internal Revenue is renamed to the Internal Revenue Service (IRS). In the seventy years since, the IRS has been responsible for collecting federal federal taxes.
Today, the IRS is the largest bureau within the Department of the Treasury and employs nearly 80,000 people.
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