Tax Day 2011: When did America levy its first income tax? The Civil War.
To finance the Civil War, the Union government levied taxes on products, companies, and incomes. How income taxes have – and haven't – changed in the 150 years since.
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• The income tax was part of a large and complicated web of federal levies during the war, ranging from duties on specific industries (transportation) and products (zinc) to license fees for a host of occupations.
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According to histories kept by the Library of Congress and the US Treasury, Congress's Revenue Act of 1861 included a tax on personal income. But the first income tax collections began after the Revenue Act of 1862, which established the commissioner of Internal Revenue. "The income tax generated approximately $55 million in government revenues during the war," wrote Fox.
The tax was repealed in 1872.
In 1895, the US Supreme Court ruled that a new income tax (passed in 1894) was unconstitutional, because it was a direct tax on individuals and not apportioned among the states on the basis of population. In 1913, the sixteenth amendment to the Constitution was ratified, paving the way for income taxes in the modern era. The first Form 1040 was introduced in that year.
The top-bracket tax rate reached a high of 94 percent during World War II, according to data from CCH, a provider of tax information. Since then, the top rate has fallen gradually, reaching 50 percent in 1982 and 35 percent today.
Tax Day 2011:
Part 2: What's new for homeowners?
Part 4: When did America levy its first income tax? The Civil War.