February: Americans think of Black History Month, Valentine’s Day, Lincoln’s and Washington’s Birthday, and Groundhog Day. But February of 2013 is especially significant, as this month is the 100th anniversary of the ratification of the 16th Amendment empowering Congress to impose the federal income tax. For Americans in 2013, the federal income tax, automatic withholding, the IRS, and filing tax forms by April 15 are just a way of life. In fact, it is likely that most Americans are unaware that prior to 100 years ago, there was no federal income tax, with the exception of a short period when an income tax was used to help finance the Civil War.

Where We Began

Prior to 1913, the U.S. government was much smaller than today, and the taxes it collected through means other than an income tax were sufficient to finance federal government operations. For example, tariffs were placed on imports and excise taxes (similar to our modern sales tax) were placed on the sale of certain items such as horses and carriages, etc. “Indirect” taxes such as these were taxes on consumption rather than income, offering the citizen the option of controlling his tax burden by limiting his purchases. According to Article I, Section 2 of the Constitution, any type of “direct” tax, i.e., on a person directly, which could arguably include a person’s income, had to be apportioned among the states on a per-capita basis:

Representatives and direct taxes shall be apportioned among the several states which may be included in this union, according to their respective number, which shall be determined by adding to the whole Number of free Persons, including those bound to servitude of a Term of Years, and excluding Indians not taxed, three-fifths of all other persons.

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Photo: Group of people filling out tax forms in Internal Revenue office