The 16th Amendment: Establishing Federal Income Tax

The 16th Amendment to the United States Constitution gives Congress the power to collect a federal income tax from all individuals and businesses without sharing or “apportioning” it among the states or basing the collection on the U.S. Census.

Fast Facts: 16th Amendment

• Event Name: Enactment of the 16th Amendment to the United States Constitution.

• Short Description: Through a constitutional amendment, replaced tariffs with a graduated income tax as the main source of revenue for the U.S. federal government.

• Key Players/Participants: U.S. Congress, state legislatures, political parties and politicians, the American people.

• Start Date: July 2, 1909 (16th Amendment passed by Congress and sent to the states for ratification.)

• End Date: February 3, 1913 (16th Amendment ratified by the required three-fourths of the states.)

• Other Significant Dates: February 25, 1913 (16th Amendment certified as part of the U.S. Constitution), October 3, 1913 (Revenue Act of 1913, imposing the federal income tax is signed into law)

• Little Known Fact: The first U.S. tax code, as enacted in 1913, was about 400 pages long. Today, the law regulating the assessment and collection of federal income tax spans over 70,000 pages.

Ratified in 1913, the 16th Amendment and its resulting nationwide tax on income helped the federal government meet the growing demand for public services and Progressive Era social stability programs during the early 20th century. Today, the income tax remains the federal government’s largest single source of revenue.

First Income Tax Was Supposed to be Temporary

A tax attorney didn’t have much to do before the Civil War. President Abraham Lincoln signed into law the first income tax – The Revenue Act of 1862 – appointing George S. Boutwell to the office of Commissioner of Internal Revenue. The Act was passed as an emergency and temporary measure to help fund the war, and it was supposed to terminate in 1866.

The first income taxes were also higher for wealthier Americans. In 1862 the rate was 3% on income between $600 and $10,000, and 5% on income over $10,000. In 1864 the rate increased to 5% on income of $600-$5,000; 7.5% on income of $5,000-$10,000; and 10% on income of $10,000+.

In 1872, seven years after the war, lawmakers finally did allow the temporary Revenue Act to expire. However, the government continued to raise revenue through income taxes until the Supreme Court declared the Income Tax of 1894 unconstitutional. Then along came the 16th Amendment in 1913 which granted power to Congress to “lay and collect taxes on incomes, from whatever source derived.”

The IRS’ reputation for being understaffed dates way back to the beginning of the agency. They were supposedly still processing 1917 returns in 1919!

Resources: https://www.mwattorneys.com/blog/first-income-tax-was-supposed-to-be-temporary/

https://www.thoughtco.com/us-constitution-16th-amendment-4165999