Sunday, April 21, 2013

How Income Taxes Developed in the United States

As with many encroachments by government, it started at the edges. Mike Duncan and Jason Novak write:
Congress immediately passes the Revenue Act of 1913, creating the first permanent income tax.  No one really notices because the vast majority of incomes are taxed at just 1%.  The mustache twirling robber barons get pretty grumpy, though.  Then Wilson plunges us into WWI and unleashes the awesome potential of the new income tax.  The top end rate jumps to 77% and revenue increases 635%.


  1. Sort of like money printing.

    Works for awhile, but then the society adjusts to it.

  2. If I understand correctly, congress could not pass the revenue act without an amendment to the constitution allowing for the Revenue Act to take place. It would be interesting to see which if any states ratified the "amendment" that allowed for the Income Tax to come into force.

  3. As this page points out:
    The direct election of US Senators also happened around the same time. That removed one check the States had on centralizing power and budgets at the federal level. The rise of the mass media also likely played a part since it made it cheaper for media outlets to effectively share the cost of 1 national news story among themselves than write an investigative local piece, so it helped politics shift to the federal level. Special interest "crony capitalism" helped since they can get favors more efficiently in 1 central location rather than going around to every state. Citizen activists are more likely to go to a city council meeting or even drive to a state capital than they are to fly to DC to complain about the special interests.