1. Through the early 20th century, taxes tended to be low. And higher taxes designed to pay war debts would be paid down quickly and temporary taxes eliminated. 2. As is usual with government policy, taxes crept up over time. 3. The Civil War produced the first tax on personal income: the Revenue Act of 1861. Interestingly, it was called an indirect tax, defined as taxing an event: a tax on the event of receiving income .therefore it didnt have to be apportioned, merely imposed uniformly throughout all areas not in rebellion. a. The tax was moderately progressive, 3% on all income over $800. This meant that most workers didnt have to pay any tax. Revenue Act of 1861 - Wikipedia, the free encyclopedia 4. The following year, due to a greater need, Congress increased both the rates and the progressivity. The exemption was lowered to $600 @ 3%, and a new 5% on income over $10,000. This, then was the first progressive, not flat tax. The law also imposed a duty on paymasters to deduct and withhold the income tax, and to send the withheld tax to the Commissioner of Internal Revenue. Revenue Act of 1862 - Wikipedia, the free encyclopedia a. After the war exemptions were increased, and rates lowered, and in 1872, the tax was abolished. b. But, having had a taste of taking and using free money, politicians passed more than 60 bills designed to reinstate the income tax over the next 20 years. David G. Davies, United States Taxes and Tax Policy, p. 22. 5. Socialist, Populist, and Progressive movements paralleled this move, and this desire based on taxing the rich. In 1894, the Democrat-controlled Congress passed a bill that included a flat income tax but part included taxes on income from real estate and personal property, and this triggered a court challenge as a direct tax infracting the Constitutions apportionment rule, a. Pollock v. Farmers' Loan & Trust Company, 157 U.S. 429 (1895), aff'd on reh'g, 158 U.S. 601 (1895), with a ruling of 54, was a landmark case in which the Supreme Court of the United States ruled that the unapportioned income taxes on interest, dividends and rents imposed by the Income Tax Act of 1894 were, in effect, direct taxes, and were unconstitutional because they violated the provision that direct taxes be apportioned. http://en.wikipedia.org/wiki/Pollock_v._Farmers'_Loan_&_Trust_Co. b. Interesting decision, since the same principles had been upheld vis-à-vis the 1861 Revenue Act . Springer v. United States, 102 U.S. 586 (1881), was a case in which the United States Supreme Court upheld the Federal income tax imposed under the Revenue Act of 1864. Springer v. United States - Wikipedia, the free encyclopedia 6. The Progressives were horrified! They had been focused on forcing the money class to pay in proportion to their ability to pay which, essentially was the first half of From each according to his ability, to each according to his need. From each according to his ability, to each according to his need - Wikipedia, the free encyclopedia a. The Progressives launched a campaign designed to reverse this decision, and that culminated with the ratification of the 16th Amendment, in 1913. The above based on chapter 8 of "Hostile Takeover," by Matt Kibbee Neat bumper-sticker, eh? From each according to his ability, to each according to his need.