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History Of Income Tax
And Other Taxes In The U.S.

In order to thoroughly review the History of Income Tax and how the income tax history in past times has shaped the United States, it is important to understand the significant changes to the local, state and federal tax systems that occurred through the centuries in response to changing conditions.

It is also critical to understand the way government has evolved over the same periods.

"If, from the more wretched parts of the old world, we look at those which are in an advanced stage of improvement, we still find the greedy hand of government thrusting itself into every corner and crevice of industry, and grasping the spoil of the multitude. Invention is continually exercised, to furnish new pretenses for revenues and taxation. It watches prosperity as its prey and permits none to escape without tribute. ~Thomas Paine (www.QuoteGarden.com)

Let's Examine The History Of Income Tax
Regarding the history of income tax versus the many different kinds of taxes collected today, their relative amounts, and the enormity of all of the tax receipts collected are much, much different than they were at the turn of the century.

Some of these modifications can be linked to certain occasions in history, like wars or constitutional amendments like the 16th Amendment, which gave Congress the authority to impose a tax on an individual's income.

Some of the alterations occurred more slowly and these types of changes were in response to societal changes, evolving economic conditions, and ever changing functions and duties taken on by government. This is all part of the history of income tax in the U.S..

Part 1.
Taxes During Colonial Times

Throughout much of the history of taxes in the U.S., it was unusual for the single taxpayer to have much contact with the Federal taxing establishment because most tax revenues resulted from customs duties, tariffs and excise taxes - and not from individuals.
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Part 2.
Taxes In The Post Revolutionary Era

Because Americans were fearful of a Federal Government that could be far too strong, in 1781 the Articles of Confederation were implemented, which gave a lot of political power to each of the indivdual States in the Union.
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Part 3.
Taxes During The Civil War

At the time of the Civil War, the Revenue Act of 1861 was passed by the Congress. This resulted in previous excise taxes being reinstated and also forced a personal income tax. Incomes over $800.00 per year were to be taxed at 3 percent.
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Part 4.
The History Of The 16th Amendment

When the Civil War ended, much of the tax revenues were no longer needed so most taxes were rescinded. By 1868, liquor and tobacco taxes were the Government’s primary source of revenue. In 1872, they even did away with the personal income tax.
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Part 5.
Taxes Through World War 1 And The Great Depression

The entry of the United States into World War I greatly increased the need for revenue and Congress responded by passing the 1916 Revenue Act. The 1916 Act raised the lowest tax rate from 1 percent to 2 percent and raised the top rate to 15 percent on those with incomes in excess of $1.5 million.
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Part 6.
The Social Security Tax And Taxes During World War II

On August 14, 1935, the Social Security Act was signed into law by President Franklin D. Roosevelt. The Social Security Act was passed basically as the result of difficult economic times during the Great Depression. Under the new law, workers who lost their jobs received payments called “unemployment compensation.”
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Part 7.
Taxes After World War II

After World War II and a number of income tax cuts, the Federal tax burden as a percentage of GDP went from a wartime high in 1944 of 20.9% back down to 14.4% in 1950. However, with the Korean War and the extension of Social Security, requiring even more revenues, by 1952, the tax burden returned back up to 19% of GDP.
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Part 8.
The Reagan Tax Cuts

In discussing the Reagan Tax Cuts, after Ronald Reagan became President in 1980, there was a basic change in federal income tax policy when the Economic Recovery Tax Act of 1981 was signed in to law - with strong bi-partisan Congressional support.
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Part 9.
Social Security And Medicare Taxes

Social Security Taxes and Medicare Taxes

As we discuss Social Security and Medicare Taxes, from the time it was enacted up until 1956, the Social Security System remained basically unchanged. From then on though, when Disability Insurance benefits were added in 1956, Social Security began to change steadily with benefits increasingly being added to the program.
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Part 10.
The Tax Reform Act Of 1986

Regarding the Tax Reform Act Of 1986, even after the changes to Federal tax laws of the early 80’s, there were many that still thought the U.S. income tax needed to be revamped. Numerous political leaders in both the Republican and Democrat parties became swayed by the post (‘82) recession boom that lowering marginal tax rates did result in returning strength in the economy.
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Part 11.
The Taxpayer Relief Act of 1997

The passage of the 1997 Taxpayer Relief Act brought additional changes to the United States Tax Code, ultimately resulting in a tax cut for many Americans. However, the piece of this new legislation that received the most positive and negative attention was the Child Tax Credit. Click here for more

Source: U.S. Department of Treasury

History Of Income Tax
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History Of Income Tax