Taxing times

WITH April 15 just around the corner, Americans are giving as much thought as they ever do to the 16th Amendment, which legalized the federal income tax. Before 1913, the federal government raised revenue by selling lands and imposing tariffs and excise taxes. The interest in income taxes was kindled in the 1890s at a time of growing regionalism, specifically West and South vs. the East. The industrialization of New England and the mid-Atlantic states was to be contrasted with major economic woes confronting America's farm-ers, especially in the Great Plains and Cotton Belt, where overproduction, falling prices, and debt were widespread. In addition, a farmer's main asset was land, which appreciated and served as the basis of local taxation. Business people in the East had major investments in other kinds of property -- mostly tax-free -- and through the tariff appeared to be granted protection from foreign competition.

And so in 1894 Congress lowered tariffs and re-introduced the income tax which had been passed and repealed during the Civil War. But the Supreme Court held that the tax was invalid on the grounds that the Constitution required such a direct tax to be apportioned among the states according to population. The only alter-native was a constitutional amendment, which Congress submitted July 9, 1909. The same year Congress put a 1 percent tax, or ``excise levy,'' on net corporate income over $5,000, a tax upheld by the Supreme Court in 1910.

When the 16th Amendment was finally ratified in 1913, Congress again lowered the tariff and im-plemented the income tax. At first it affected only a tiny fraction of the population. Most citizens never knew what a 1040 form was until World War II, when the tax was democratized and withholding introduced.

Thomas V. DiBacco is a historian at the American University.