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Period: to
16th amendment
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Congress creates an income tax to fund the Civil War
Commissioner of Internal Revenue and enacts first national income tax for war expenses. 3% tax was set on all incomes greater than $800. Later was set to 5% for incomes between $600 and $5,000. Then 10% to incomes greater than $5,000. After war Congress repeals income tax -
Another income tax is established
Congress made another income tax of 2% on incomes greater than $4,000. Opponents don’t like the tax because according to them it “takes from the wealth of the thrifty and the enterprising and gives it to the shifty and the sluggard.” -
The Supreme Court strikes down the federal income tax
n Pollock v. Farmer’s Loan & Trust Co. the Supreme Court rules that new federal income tax is unconstitutional. They say it's unconstitutional because it violates Article I, sections 2 and 9 of the Constitution. Sections 2 and 9 are known as the “rule of apportionment,” and specify that all federal taxes must be imposed based on the population of each state and not on the people directly. -
First income tax is levied under the Sixteenth Amendment
After the 16th Amendment was ratified, Congress levies 1% tax on personal incomes more than $3,000 and a 6% tax on incomes more than $500,000. Those taxes affect a very small portion of the population. The Treasury Department devises the first Form 1040. -
Top tax rate hits 77 percent
Congress, to raise additional taxes necessary to finance the WWI, increased the top rate of income tax to 77%. Which is the all-time high. The Modern federal tax rates range between 10% and 38% -
Congress sets up the U.S. Tax Court
The U.S. Tax Court was created by Congress to give taxpayers a place to talk about decisions of the Internal Revenue Service that involves payment of federal income, gift, or estate taxes. Decisions from the Tax Court’s can be appealed to the federal courts of appeals and are subject to review by the U.S. Supreme Court. Today there are 19 tax court judges who are appointed by the President for terms of fifteen years. -
Illegal gains are subject to the income tax
The Supreme Court, in the case of United States v. Sullivan, says that financial gains made from illegal activities, like drug sales and gambling, are taxable income under the Revenue Act of 1921. The Court says they're is no reason to exclude revenues made from illegal businesses. The Statute specifically requires payments from businesses of an kind and taxes are due the same saying the businesses were lawful. -
Government institutes withholding taxes on wages and salaries
Congress imposed income taxes on people with average incomes. People default since they haven’t saved sufficiently to pay the taxes they have. The government creates new systems of collecting income taxes by mandatory “withholding from wages and salaries.” Employers are allowed to deduct the tax employes have form their salaries before paying them. -
The Internal Revenue Service is created
Established in 1862, the Bureau of Internal Revenue was reorganized and renamed the Internal Revenue Service (IRS). Its the largest bureau within the Department of Treasury. It’s responsible for collecting all federal taxes. IRS directly with more Americans over any other institution, no matter public or private.
