Tax Day April 15th – Time To Pay

Abraham Lincoln is remembered and revered for preserving the Union and freeing the slaves. Less is mentioned about the fact that Honest Abe is responsible for the first national income tax. Lincoln first levied the tax in 1861 to pay for the Civil War. It took the form of a 3% flat tax for anyone earning more than $800 a year, about $18,000 in today’s money.

“The tax man’s taken all my dough
And left me in my stately home” ~~~ The Kinks

A little more than 20 years later in 1894, Congress reestablished the income tax, but this time, it was struck down by a divided Supreme Court. In 1909, progressives rekindled the concept of a national income tax and the movement gained steam across the cash-strapped states that continued to be added to the ever-growing country. On Feb. 25, 1913, the 16th Amendment was made official and the era of the permanent federal income tax was born. That first year, less than 1% of the population paid income tax at the rate of about 1% of their income. Following the 16th Amendment, Congress decided all taxes should be filed by March 1. The date was bumped back to March 15 in 1918, then again to April 15 in 1955.

After the Civil War, the growing industrial and financial markets of the eastern United States generally prospered. But the farmers of the south and west suffered from low prices for their farm products, while they were forced to pay high prices for manufactured goods. Throughout the 1860s, 1870s, and 1880s, farmers formed such political organizations as the Grange, the Greenback Party, the National Farmers’ Alliance, and the People’s (Populist) Party. All of these groups advocated many reforms (see the Interstate Commerce Act) considered radical for the times, including a graduated income tax.

In 1894, as part of a high tariff bill, Congress enacted a 2-percent tax on income over $4,000. The tax was almost immediately struck down by a five-to-four decision of the Supreme Court, even though the Court had upheld the constitutionality of the Civil War tax as recently as 1881. Although farm organizations denounced the Court’s decision as a prime example of the alliance of government and business against the farmer, a general return of prosperity around the turn of the century softened the demand for reform. Democratic Party Platforms under the leadership of three-time Presidential candidate William Jennings Bryan, however, consistently included an income tax plank, and the progressive wing of the Republican Party also espoused the concept.

In 1909, progressives in 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; they believed an amendment would never receive ratification by three-fourths of the states. Much to their surprise, the amendment was ratified by one state legislature after another, and on February 25, 1913, with the certification by Secretary of State Philander C. Knox, the 16th amendment took effect.

SOURCE: Yahoo News, Natl Archives