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Revenue Act
This income tax was one of the first federal income tax put on American's. With a dire need for money in the midst of the Civil War, President Lincoln and Congress agreed that an income tax was needed. Eventually becoming known as the Revenue Act of 1861, this was a 3% tax on any annual income of $800 or more. 10 years later in 1871, Congress repealed this tax. Source 1&2 -
Legal Tender Act
This act gave the the right to use paper notes to pay off governemtn bills. It got rid of only using gold or silver in transaction. Under the Legal Tender Act the governemt printed $150 million in paper money, not backed by gold or silver. This also increased the amount of money in circulation. The papernotes printed were called greenbacks, and since they were legal tender, they had to be accepted at face value. Source 7 -
The McKinely Tariff
William McKinley proposed this tariff. It raised the protective tariff rates 50%. It also increased rates for manufactured goods, and placed certain items like sugar on the free list. Source 8 -
Wilson-Gorman Tariff
William L. Wilson was the head of the House of Ways and Means Committee. In 1894 he proposed a bill that added sugar, lumbar, coal, and wool, to a free list. To compensate for the free items, the bill also proposed a 2% income tax. Gorman was a congressman who took the propsed tariff, modified it a little, then made sure the Senate approved it. Source 1&3 -
Supreme Court Decision.
A year after the Wilson-Gorman Tariff happened, the Supreme Court ruled the tariff as unconstitutional. The reasoning behind their ruling was that it was a direct tax and it didn't take into considereation the population of each state. Source 1&3 -
16th Amendment
Congress officially passed the 16th amendment in 1909. Now all that had to be done was ratification by a mojority of the states. Source 1 -
Ratification
The 16th amendment was officially ratified in 1913. It gave the right for Congress to levy income taxes. At the time it actually only needed 36 out of 48 to ratify it, but 42 did. The 36th state to ratify it, and officially make it an amendment was Delaware. The last state to ratify it was New Hampshire. Source 1&4 -
The Fiscal Year
The 16th Amendment helped increase annual revenue. In 1918, for the first time ever, the annual internal revenue surpassed the billion dollar mark. The annuanl internal revenue rose to $5.4 billion by 1920. Source 5 -
World War II
World War II not only increased employability, but it also increased tax collections. In 1943, tax collections were up to $7.3 billion. Also in 1943, withholding tax on wages was introduce. The number of tax payers was incresed to 60 million. By 1945 tax collections had reached $43 billion. Source 5 -
Tax Reform
On this date President Reagan signed the law for the Tax Reform of 1986. This reform lowered the top tax rate from 50% to 28%. This act included a $120 billion increase in taxes on businesses, and at the same time a decrease for indivudual income taxes, over five years. It is considered one of the most far-reaching taxes that has been placed on the United States, since the 16th Amendment. Source 5
