Throughout American history, taxation, either through tariffs, excise taxes, property taxes, sales taxes, or income taxes, has taken a large portion of business earnings. Corporations have lobbied legislatures for relief and hired experts to reduce those taxes.
The American colonists rebelled in 1776 because of taxation without representation. Following the rebellion, Americans discovered that even with representation, they did not much like taxes. The
The U.S. Congress passed the first national
The first attempt at a national income tax came in 1813, to fund the
A large body of research exists concerning the development of twentieth century American tax laws. These studies have explained the forces for and against income taxes as partly based on regional, occupational, and class differences. Congressmen from the northeastern section of the country opposed income taxes because their constituents were, on average, the wealthiest in the nation. Congressmen from the South and West preferred the income tax over tariffs because of the undue burden the tariffs placed on their constituents. For example, farmers opposed tariffs as economically detrimental to agriculture because tariffs forced up prices of farm inputs, such as machinery, without protecting farm crops. Farmers complained that prices for their crops fluctuated according to the world market, while input costs were set artificially high to put money in the hands of northeastern manufacturers. The objection to the tariff was based on the feeling that it was class legislation–that it taxed the farmer for the benefit of the manufacturer.
From 1900 to 1909, Congress debated the questions of tariffs and taxes. Federal income tax proposals abounded. Congressmen debated how to frame these proposals in accordance with the U.S. Constitution. Nelson
Congressmen from agricultural states continued to make
After the elections of 1912, the Democrats held control of both houses of Congress. With this power and subsequent ratification of the Sixteenth Amendment by the needed majority of states in 1913, Democrats quickly submitted a federal income tax law. The first income tax was part of the Underwood Tariff Act of 1913. This income tax law also incorporated the corporate excise tax of 1909. From a American population of 100 million, only 368,000 filed tax returns for 1913. Exemptions were $3,000 for individuals and $4,000 for couples. The tax rates ranged from 1 to 6 percent for income over $500,000. The less affluent did not have to file returns or pay income taxes. In total, the federal government collected about $35 million from the income tax in 1913. The number who were subject to taxation increased quickly, particularly as the nation entered World War I. The need for war financing lowered the exemption level and subjected a larger percentage of the population to the filing requirements. Income tax collections in 1918 were seven times greater than in the preceding year and increased more in 1919 and 1920, with the latter year’s collections being more than a hundred times greater than in 1913. Nevertheless, the percentage who had to pay taxes was still minimal until the outbreak of World War II.
Congressman Wilbur Mills, who played an important role in determining tax law.
With the entry into
Federal tax laws must originate in the House Ways and Means Committee. Therefore, that committee’s chair is a powerful figure in Congress, and no one was ever more powerful and more effective in that role than was Wilbur
The greatest impact of Mills’s retirement was the effect that his absence from the House Ways and Means Committee had on U.S. income tax laws. Mills was known for carefully editing every tax bill to be sure that it meshed with existing tax laws. Basically, because of Mills, the
Brownlee, W. Elliot. Federal Taxation in America: A Short History. New York: Woodrow Wilson Center Press, 1996. An excellent history of American taxation with explanations of why the tax laws were passed and who influenced them. Conable, Barber B. Congress and the Income Tax. Norman: University of Oklahoma Press, 1989. This book covers the detailed aspects of how Congress passed tax laws in the twentieth century. Manley, John F. The Politics of Finance: The House Committee on Ways and Means. Boston: Little, Brown, 1970. This is an excellent history of how Congress works on tax legislation. An entire chapter is devoted to Wilbur Mills, whom the author called one of the “most influential committee chairmen in recent years, if not in history.” Pechman, Joseph A. Federal Tax Policy. Washington, D.C.: Brookings Institution, 1987. A book widely used in college tax policy classes. Explains why tax bills were passed in the manner that they were. Ratner, Sidney. American Taxation: Its History as a Social Force in Democracy. New York: W. W. Norton, 1942. An excellent history of the class struggles in taxation politics. Seligman, Edwin R. A. The Income Tax: A Study of the History, Theory, and Practice of Income Taxation at Home and Abroad. New York: Macmillan, 1914. A classic work on income taxation before the passage of the Sixteenth Amendment. Zelizer, Julian E. Taxing America: Wilbur D. Mills, Congress, and the State, 1945-1975. New York: Cambridge University Press, 2000. This volume analyzes the work of Mills and provides insights into the evolution of income taxation, Social Security, and Medicare during Mills’s tenure as chairman.
Bush tax cuts of 2001
Corporate income tax
Personal income tax
Internal Revenue Code
Federal monetary policy
Stamp Act of 1765
Tea Act of 1773
Whiskey tax of 1791