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The Income Tax: A Century Is Enough

By Chris Edwards | Oct 3, 2013

Alexander Hamilton won in the end. As Treasury Secretary in the 1790s he championed an array of “internal” taxes to supplement federal revenues from import tariffs. Thomas Jefferson despised Hamilton’s internal taxes as assault on liberty, and when elected in 1800 he made sure that they were abolished.

The Jeffersonian view held sway for decades, but by the late 19th century the growth in government and concerns about high tariffs led to calls for new revenue sources. The first income tax was imposed to fund the Civil War and lasted until 1872. Another income tax was imposed in 1894, but it was struck down by the Supreme Court as unconstitutional.

At the turn of the 20th century, the rise of Progressivism and the Democratic opposition to high tariffs generated support for an income tax. President William Howard Taft proposed a Constitutional amendment for an income tax in 1909. It was passed by the House and Senate, and then ratified by the states in early 1913. Congress got to work on legislation, and the modern income tax was signed into law by President Woodrow Wilson exactly 100 years ago today, October 3, 1913.

That’s when the problems started. The 16th Amendment allowed for “taxes on incomes, from whatever source derived,” but it did not define how “income” should be measured.


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