“Exactly 100 years ago Sunday, on Feb. 3, 1913, Delaware became the 36th state to ratify the proposed 16th Amendment, making a nationwide income tax part of the Constitution,” writes Joseph Curl in the Washington Times. “America had collectively decided that the federal government could, henceforth, take Americans’ money ‘from whatever source derived,’ and decide, at a whim, how much to take from each citizen. Ah. Just as the Founders intended.”
It wasn’t the first income tax. President Abraham Lincoln levied that to pay for the Civil War.
“Incomes above $800 annually ($20,370 in 2012 dollars) were taxed at 3 percent,” Curl notes. “Yes, America’s first income tax was a flat tax.”
But it quickly became “progressive,” taking a higher percentage from those with higher incomes. That was an easier sell to Congress, but that body still made sure the income tax would expire in 1866.
“In a shocking turn never repeated in American history, a tax created by Congress actually did expire,” Curl says.
When Congress tried another income tax in the 1880s, the Supreme Court ruled it unconstitutional. That’s why it took several more decades and a constitutional amendment to get it enacted again.
“That first year, 1913, there were seven brackets, starting at 1 percent, ending at 7 percent,” Curl explains. “Taxes fell during the Depression, jumped during the New Deal (when the top rate hit 79 percent) and hit the big time during WWII: In 1944, the lowest bracket was 23 percent; the top bracket, 94 percent.”
Now, there’s no question the income tax is needed, and funds vital programs (tariffs and import duties and excise taxes just won’t cut it anymore). We’ve decided, as a nation, that the care of our elderly and our poor is a national responsibility. To pay for those things, as well as national defense, infrastructure and other spending, we’ve got to have a steady revenue stream.
It’s just that the income tax is such a muddy stream. The 16th Amendment was only 30 words long, but the income tax code now takes up 74,000 pages.
“Since 1913, technology has made most things smaller, more efficient and easier to use,” points out Scott A. Hodge of the Tax Foundation. “The tax code, however, has become huge, expensive and an annual anxiety. We need simplification now.”
President Barack Obama, in an interview before Sunday’s Super Bowl, agreed in principle, at least, that we need a simpler tax code. He also said rates should stay the same.
As always, the devil is in the details. And that’s why the 16th Amendment’s phrase “from whatever source derived,” is so troubling. It leaves so much up to the federal government.