There shall be a firm and perpetual peace between his Britannic Majesty and the said States,...wherefore all hostilities both by sea and land shall then immediately cease.
Originally, monies collected from Whiskey and tobacco taxes provided much of
the government's early revenues. However, financing the Revolutionary War was expensive and the young United States, under The Articles of Confederation, struggled to raise funds from the thirteen states.
The Articles of Confederation (AOC), left the power to the states, leaving the federal government and the executive branch very weak without the power to levy taxes.
The AOC, adopted in 1781, reflected the
American fear of a strong central government, something Thomas Jefferson fought against. This fear of a strong central government left much of the political power in the hands of the States. Therefore, the national government had few responsibilities and no nationwide tax system, relying on donations from the States for its revenue. Under the Articles, each State was a sovereign entity and could levy tax as it pleased.
In other words, the States didn't have to pay the Nation.
To pay for the war, the post Revolutionary War era brought about many new taxes. To pay the debts of the Revolutionary War, Congress levied excise taxes on distilled spirits, tobacco and snuff, refined sugar, carriages, property sold at auctions, and various legal documents.
The government however, also decided to use taxes for social influence. In Pennsylvania for example, there was an excise tax on liquor "to restrain persons in low circumstances from an immoderate use thereof." Much like the tax on cigarettes today.
So what about the income tax? When did this come into play? The income tax was not issued until the Civil War. However there was talk of using it sometime before that. There was never a thought to use taxes to equalize income and wealth, or for the purpose of redistributing income or wealth. Although Thomas Jefferson had his opinions on such an idea.
Jefferson, to "promote the general welfare" once wrote:
To take from one, because it is thought his own industry and that of his father
has acquired too much, in order to spare to others who (or whose fathers) have
not exercised equal industry and skill, is to violate arbitrarily the first
principle of association, "to guarantee to everyone a free exercise of his
industry and the fruits acquired by it."
This sounds unfair doesn't it. It throws Darwinism out the window, like a colonial chamber pot. Which is why men would always walk on the building side of the sidewalk, so that they would receive the brunt of the mess, should someone decide to dispose of last night's eliminations at that juncture.
Today, we have the tiered tax system to "promote the general welfare". Sure, you can say its not fair, but that is how it is done. There are all sorts of arguments for a fair tax plan, and ideas to only tax consumer goods and do away with the income tax altogether. Who knows what is best? Who knows if the Fair Tax Act would actually work? I'll save the discussion for another time.
The income tax, as we know it today, was first exercised during the Civil War. When the Civil War erupted, Congress passed the Revenue Act of 1861, which in addition to restoring earlier taxes, also imposed a tax on personal incomes. Any person making more than $800 a year was levied a 3 percent tax. The tax was not enforced until the following year.
In the spring of 1862, it was now clear that the war would not end quickly, as originally thought, and the government would need additional revenue to pay for its $2 million daily growth in debt.
To remedy this Congress passed new taxes on playing cards, gunpowder, feathers, telegrams, iron, leather, pianos, yachts, billiard tables, drugs, patent medicines, many legal documents and once again... whiskey.
The 1862 law also introduced the first tiered tax system. Incomes up to $10,000 were taxed at 3 percent, while anything higher was taxed at 5 percent. There were standard deductions and taxes were withheld at the source by employees.
When the war ended, the need for a continuous Federal revenue stream declined and most taxes were repealed in 1868. The income tax was abolished in 1872.
By 1913, 36 States had ratified the 16th Amendment, which authorized an income tax. The new income tax law had rates beginning at 1 percent and rising to 7 percent for taxpayers with income in excess of $500,000. Less than 1 percent of the population paid income tax at the time. They used the 1040 form, which is something we all know and love.
World War One greatly increased the need for federal revenue generated through taxes. An act in 1916 raised the tax rate. It was raised again in 1918. The Roaring Twenties allowed the economy to boom, and Congress cut the tax rate 5 times.
Even after the crash of 1929, another tax hike was enacted in 1932, and so on and so forth. Each new war brought more money needed, more taxes, different taxes, sneakier taxes, etc...
We the People, in order to form a more perfect Union... must pay taxes.