On February 3, 1913 — just a few days shy of 100 years ago — the 16th Amendment to the U.S. Constitution was ratified, enabling Congress to impose a graduated income tax on Americans. Since that time, reports CNSNews.com, federal revenues have grown by an astounding 267,869 percent, in large measure as a result of this revenue stream.
CNSNews.com’s parent organization, the Media Research Center, asked Pete Sepp, executive vice president of the National Taxpayers Union, to calculate how much federal revenue had increased in the era of the income tax. “He found that the U.S. government estimates it collected $921 million in direct revenues for tax year 1912, compared to the $2.468 trillion it collected in 2012,” the website writes. “That outlandish increase would be even bigger if you take out postal receipts, which accounted for about $250-$275 million for 1912.”
Of course, the dollar was far more valuable in 1912 than it is today. In terms of 2012 dollars, the federal government took in just $21.4 billion in 1912, making the increase in revenue over the last century 11,533 percent in real terms — still an almost unfathomable amount.
Not all of this revenue is derived from the income tax. The Internal Revenue Service brings in about 59 percent of all federal receipts. Approximately four-fifths of that comes from the individual income tax, with the remainder coming from the corporate income tax. All but a small fraction of the remaining revenue is derived from social insurance (e.g., Social Security, Medicare) taxes, most of which are similar to the income tax in that they are based on earnings and are withheld from individuals’ paychecks. In fact, without the constitutional amendment that made the income tax possible, these taxes — and their method of collection — could not exist.
Americans’ first taste of income taxation occurred during the War Between the States. The tax was modified in the immediate postwar period and was finally allowed to expire in 1872.
Tariff revenues then became the federal government’s primary revenue source, but the tariff brought in far more than was necessary because it was not being used purely as a revenue-raising measure. “The reason the tariff was so high was, ostensibly, to protect America’s burgeoning industries from foreign competition,” John Steele Gordon wrote in the Wall Street Journal.
Click here to read the entire article.