We Didn’t Always Have a Federal Income Tax

The United States did not have a federal income tax 109 years ago.

There had been one before—to help finance the Civil War, Congress established an income tax in 1861 that wasn’t repealed until 1872—but the most noteworthy source of taxation in the United States, the one whose due date gets the name “tax day,” wasn’t introduced until 1913, and it took the 16th Amendment to make it happen.

How did the federal government get its money prior to that? Mostly through tariffs. We used to be big tariff guys. We also didn’t have as much federal spending, which changed the calculus.

But yeah. The federal income tax hasn’t been here forever. Post-industrial revolution thing. There are people alive who were alive when there wasn’t a federal income tax. And when it was first established, in 1913? It only applied to those making more than $3,000 per year (roughly $80,000 today, adjusted for inflation), which was only three percent of the population. Those in the lowest taxed tax bracket were taxed at one percent. The highest tax bracket—applied to those bringing in more than $500,000 (or more than $13 million in today’s currency)—sat at seven percent (I’m assuming this means only the amount over $500,000 was taxed at seven percent, as opposed to all of those earners’ income being taxed at seven percent, but maybe this too has changed over time). Which makes it, by today’s standards, both a very low income tax and a very progressive income tax, and I mean “progressive” in the sense that it progressed as opposed to the political definition of that word, though I suppose that applies these days too.

Editor. Occasional blogger. Seen on Twitter, often in bursts: @StuartNMcGrath
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