The Federal Income Tax Turns 100

Although the federal government had successfully operated without an income tax for 124 years under the Constitution, the American people in 1913 chose to ratify the Sixteenth Amendment, giving Congress the "power to lay and collect taxes on incomes, from whatever source derived." It is reasonable to expect that the people would not have granted such a broad power to the federal government unless circumstances required it. So what prompted this desperate action? Why was an income tax suddenly necessary in America 100 years ago? In truth, it wasn't needed at all.Total federal tax revenue was at an all-time high in 1913, and tax receipts that year were almost 25 percent higher than they were in 1909, the year Congress submitted the Sixteenth Amendment to the states for ratification. Moreover, there was no debt crisis. In 1909, the national debt was only 8.2 percent of the gross domestic product (GDP). By 1913, the debt-to-GDP ratio had actually dropped to 7.5 percent. In comparison,...(Read Full Article)

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