A Brief but very Taxing History

If you are looking for an anti-tax article look some where else. My goal here is not to support or besmirch taxation, but to understand how taxation has functioned in our countries history.

There have been attacks against Obama for saying he would ONLY tax people making more than $250,000. I wonder why? Of course, if I made a quarter of a million dollars per year then maybe I would cringe a little hearing that a tax increase is coming. But I have always been lower middle class and can’t remember a time when my check didn’t seem to shrink a little. Paying taxes is not a joyful act, and usually the taxes we pay are taken from us, and not something we actually agree to pay.

What surprised me are the political attacks on Obama for wanting to take money from people who have a lot of it and spreading the wealth around. What I hear is not that Obama wants to be a political Robinhood, taking money from the rich and giving it to the poor, but Obama wants to take some money from the rich and not take it from the middle class.


The attacks on Obama seem to object to the rich paying more taxes than the non-rich. But that is true now, and has been for a long time. It is called the Progressive Income Tax and it was actually added to the US Constitution as the 16th Amendment. Since Amendments have to be ratified by the states, and the states do that ratification by people voting, that means that majority vote established a progressive income tax on February 25, 1913. We have a progressive income tax because 2/3rds of the states ratified the proposed amendment.
When Obama calls for people with money to pay more income tax than people who make less money that is not a new idea, it is not a socialist idea, and it is not an idea that most people have (in varying degrees) agreed since 1913 to accepted.

How Did We Pay For The Revolutionary War?


In the very earliest days of our countries history most people had little contact with the Federal government. But a government doesn’t function without funds. You can’t have a group of law makers without having some place for those people to meet to make laws. They either have to rent a space, or buy a space and build a building and that takes money. There was no income tax in the earliest days of our Nation’s history, so where did the money to support the government come from? Most of the Federal government's tax revenues came from excise taxes, tariffs, and customs duties.

Something had to change, however, when this country issued a Declaration of Independence and went to war with England to win independence. Before the Revolutionary War, the colonial government had only a limited need for revenue, while each of the colonies had greater responsibilities and thus greater revenue.

When we went to war with England we had to pay for bullets, food, uniforms, ships and everything else needed to wage a war. More money was needed, and excise taxes, tariffs, and customs duties were not going to do it. For one thing, the taxes on trade were not going to bring in the big bucks, and, because the country was at war, their trade with other countries was diminished. Congress decided to finance the Revolutionary War, by slapping an excise taxes on distilled spirits, tobacco, sugar, carriages, property sold at auctions, and various legal documents. These sound like sin taxes and luxury taxes to me.

The Articles of Confederation and Taxation


In 1781 the Articles of Confederation, passes tax laws that reflect the distrust Americans had of a strong central government. Most of the powers to tax were given to the States and the national government’s responsibilities were limited so that the size of the Federal Government would be kept small, their tax revenue needs by the Federal Government would also be small. Under the Articles, each State was a sovereign entity and could levy tax as it pleased.

The Constitution and Taxation

The US Constitution was adopted in 1789, at by that point the leaders of our country realized that they could not safely rely on excise taxes, tariffs, and customs duties to support the central government of this new Nation. If you rely on taxing foreign goods to support the Federal Government you end up with a Federal Government that can be bankrupt by other countries if they got mad and just stopped trading with our country.

So the Constitution was given the power to:



"…lay and collect taxes, duties, imposts, and excises, pay the Debts and provide for the common Defense and general Welfare of the United States."

BUT the people were still very leery of a strong central government, and so to keep things in check, the taxes were imposed by the Federal Government, but the collection of the taxes was left as the responsibility of the States.


In the early days of our Nation’s history an income tax was just not seen as a reasonable way to support the government. Thomas Jefferson 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. ~ Thomas Jefferson

In other words, you should not punish one person for working hard, having skill and getting rich, and give that money to someone else who has need but did not work hard, or had no skills.

The Whiskey Revolution

As has been said, to support the Revolutionary War the Federal Government levied a tax on whiskey. As usual, once a tax was in place, the government refused to lift the tax. This lead, in 1784, to a group of farmer/whiskey makers in southwestern Pennsylvania to physically opposed the tax on whiskey. The Whiskey Tax rebellion was viewed as a serious threat to the Federal Government, and President Washington sent Federal troops to suppress the Whiskey Rebellion. This act of enforcing a tax with Federal Force clearly established how important the government felt about its revenue. The Whiskey Rebellion also confirmed, that the anti-tax sentiments that sparked the Revolution had not evaporated after that war was won.

The French Revolution and USA Property Taxes

France had a Revolution that ran from 1789 to 1799, and that event disrupted trade and caused a revenue shortage with the US Federal Government. In 1790 the Federal Government levied its first direct tax on the citizens who own their own property: houses. land, slaves, and estates. They called these taxes Direct Taxes because they were recurring taxes and the people who owned land and slaves were required to pay a tax on that property directly to the government based on the assessed value of that property. Thomas Jefferson, mentioned above, was already on the record as being opposed to direct taxes so when he was elected President in 1802, direct taxes were abolished and for the next 10 years the only Federal Revenue came from excise taxes.

The War of 1812

The US went to war, again, with England, in what we now call the War of 1812, and to support that war Congress imposed additional money through tariffs, customs, and duties. The Federal Government also raised money by issuing Treasury notes. Congress repealed these excise taxes, tariffs, and customs duties and for the next 44 years the Federal Government collected received most of its revenue from high customs duties and through the sale of public land.

The Civil War and Personal Income Tax


To support the Civil War Congress passed the Revenue Act of 1861, which restored earlier excises taxes and imposed a tax on personal incomes. When it became clear, in 1862, that the War Between the States, was not going to end quickly, the Federal Government passed additional taxes on playing cards, gunpowder, sending telegrams, on shortage raw materials such as iron, and leather. The government also taxes luxuries such as pianos, yachts, and billiard tables.

The income tax was abolished in 1872, and the Federal Government, from 1868 to 1913, got most of its money from excises taxes.

The Spanish-American War and The 16th Amendment


I think, as the size and responsibilities of the Federal Government grew, the taxes on imported goods, these tariffs got higher and higher until the taxes on imported goods were so high that other countries just felt they couldn’t or wouldn’t pay them. The importation dropped reducing Federal revenue. There were also retaliatory tariffs and taxes put on US Goods going out to other countries.

The War Revenue Act of 1899 sought to raise funds for the Spanish-American War by selling bonds, and doubling the taxes on beer and tobacco. Not to leave the kids out, a tax was even imposed on chewing gum. With the Spanish-American War ended the War Revenue Act expired and in 1902, the revenue going in to the Federal Government dropped to 1.7% of Gross Domestic Product to 1.3%.

[Notice how closely taxation is tied to war.]

A movement to establish an income tax were introduced by Congressmen from agricultural areas because farmers were afraid that any shortfall in revenue would be made up by increasing taxes on property, and, let’s face it, without land, a farmer is just a guy standing around with nothing to do.

The people saw there had to be some reliable way to support the Federal Government, and the debate that followed lead to a Constitutional amendment that would allow the Federal government to impose tax on people’s incomes.

By 1913, 36 States had ratified the 16th Amendment to the Constitution. In October, Congress passed a new income tax law with rates beginning at 1 percent and rising to 7 percent for taxpayers with income in excess of $500,000.

World War I and the 1916 Revenue Act

When the US entered World War I there was an increased need for revenue and Congress passed the 1916 Revenue Act. The Act increased the top tax rate to 15 percent on taxpayers with incomes in excess of $1.5 million. The 1916 Act also imposed taxes on estates and excess business profits. Other changes (increases) followed.

Taxes and the 1929 Stock Market Crash

The October 1929 stock market crash and the Great Depression that followed lead to a shrinking revenue for the Federal Government. Congress responded to falling revenues with the Tax Act of 1932 which dramatically increased tax rates once again. This was followed by another tax increase in 1936, and again in 1939.

Income tax was firmly established by 1939 and the taxation of income was progressive, meaning the more you made the more you paid. The thinking was, of course, that a rich person could afford to pay more in taxes and would still have enough money left to live a good life.

You may hate taxes, but do we really believe we can function as a nation without providing revenue to support the government and the services they provide? Are we going to have bake sales to pay for fighter plans. Are we really willing to have pay a toll to a road entrepreneur just to back out of our drive way? Would we really prefer to fight our war with a bunch of volunteer guys with deer rifles? Instead of law enforcement would we rather go to vigilante justice and everyone carrying Colt 45?

Do we want to amend the constitution again and institute a flat tax? Until then, I don’t think you can call someone supporting the 16th Amendment to the Constitution a socialist or a communist.