For those who have not been keeping tabs on anniversary dates, during 2014, Americans were filing 2013 federal tax returns, it was the 100th time of filing annual federal income tax returns, because back in 1913, when the 16th Amendment of the United States Constitution was ratified, is when the federal income tax became part of our daily lives, as Americans. Of The question then becomes, how did this federal income tax come to be? It sure has a very interesting history.

Taxation by the federal government is as old as the Republic itself, and the issue of taxation has always been a very controversial issue. In fact some American historians have argued that the American Revolution started as a tax revolt, remember the old colonial slogan of “no taxation without representation”? It was the issue of, could the British Parliament directly tax the American colonist, without electing representatives to the British Parliament. It was one of the major issues that spurred the colonial rebellion. The issue of taxation came up again, when the federal government was being formed, because the power of taxation was lacking with the federal government, under the Articles of Confederation (1781), which caused the calling of the Federal Constitutional Convention in 1787 to draft the US Constitution, and thusly gave the Congress “To lay and collect Taxes, Duties, Imposts and Excises” (US Const., Art I, § 8, cl. 1).

For most of the nineteenth century, the main source of tax revenue of the federal government was the tariff, which is a tax on foreign imports. Not only it sustain a source of federal tax revenue, but, as Col. Alexander Hamilton argued (the first Treasury Secretary) in his report to Congress on the tariff (1791), to encourage the development of domestic industry and commerce. In fact, the issue of the tariff is one of the major rifts that caused the Civil War, because the Southern states wanted to keep it agrarian feudalistic society, thusly heavily depended on foreign trade and foreign exports; versus the Northern states had the desire to heavily develop domestic industry and commerce, so there is no heavy dependence on foreign trade and foreign exports.

Of course when the Civil War occurred in 1861, the federal government needed another major source of tax revenue, other than the tariff, to pay for the costs of the Civil War, thusly Congress enacted the first federal income tax in 1862 (the Confederate Congress, also enacted an income tax in 1863, for the Southern Confederacy). After the Civil War, Congress then repealed the income tax in 1872, arguing it was just a temporary measure, due to the Civil War. However, as time marched forwarded into the latter part of the nineteenth century, with industry and commerce really gathering strength, there was a need to restore the income tax, which Congress did in 1894.

However, unlike the 1862 income tax act, the 1894 income act was constitutionally challenged, because part of the income tax that was imposed was on rental income from real estate and dividend income from corporations. The argument was that taxing the income stream from owning real estate property and or owning a corporation is a “direct tax” on property an violated a provision of the US Constitution, which forbid any “[c]apitation, or other direct Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.” (US Const. Art I, § 9, cl. 4). The constitutionally case of the 1894 tax act, called Pollock, went all the away to the US Supreme Court, and in 1895, and agreed with the challengers that the taxation on the income stream from owning real estate property or and/or owning a corporation is a “direct tax” on property and thusly needs to be apportioned by population. It took from 1895 to 1913 to gather enough political support in Congress and in the several states to enacted and ratify the 16th amendment of the US Constitution, to make the income tax a permanent part of our lives.