For many, Feb. 3, 1913 is a dark day in American history, because this is the day that the 16th Amendment was ratified and income tax became a part of our lives. How did a nation agree to have their government take their money?
The government’s right to tax is found in the Constitution (Article 1, section 2, section 8, and section 9) and Congress took advantage. The Revenue Act of 1861 was passed during the Civil War and included a tax on personal incomes to help pay war expenses. The tax was repealed ten years later.
In response to the 1893 depression, the 1894 Wilson-Gorman Tariff Act reduced tariff rates and instituted an income tax. It was ultimately a disaster. The lower tariff led to the importation of cheaper goods that competed with American-made products. But it was the income tax that really sunk the Wilson-Gorman Tariff. The tax received strong pushback from wealthy citizens and was ruled unconstitutional in 1895.
On Jul. 12, 1909, progressives in the Congress again attached a provision for an income tax to a tariff bill. Conservatives, hoping to kill the idea for good, proposed a constitutional amendment enacting such a tax. This time, the proposed 16th Amendment removed the Supreme Court’s objection by allowing the Federal Government to tax individual incomes without regard to state population. Conservatives were more than surprised to see that one by one states voted in favor of the amendment.
Support for the income tax was strongest in the western and southern states and opposition was strongest in the northeastern states. Supporters of the income tax believed that it would be a much better method of gathering revenue than tariffs. Opposition to the 16th Amendment was led by establishment Republicans because of their close ties to wealthy industrialists.
Between 1909 and 1913, several conditions favored passage of the 16th Amendment. Inflation was high and many blamed federal tariffs for the rising prices. The Republican Party was divided and weakened by the loss of Theodore Roosevelt and the insurgents who joined the Progressive party. The Democrats won both houses and the Presidency in 1912, providing the final push for the amendment to be ratified.
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