The point of this post is to simply give a time line of how income tax has evolved into the largest source of income for the federal government, when it was not instituted until 1861. This time line only goes to “modern times”, after 1945 there are way too many changes for me to list here
1788: The United States Constitution is ratified, including Article I, Section 9.
1861: A 3% personal income on all individuals making more than $800/yr. Income tax is instituted as a withholding.
1872: The Federal income tax is lifted.
1894: A flat rate Federal income tax is instituted. Taxes are paid as a single amount to the government on an annual basis.
1913: The 16th Amendment is ratified, allowing for a flat Federal income tax (see http://www.archives.gov/exhibits/charters/constitution_amendments_11-27.html#16 for details). Congress passes a flat rate income tax ranging from 1%-7%. Taxes are paid as a single amount to the government on an annual basis.
1918: Income tax rates are raised to be between 6% and 77%.
1928: Income tax rates have been lowered to be 1%-25% (over the course of five cuts).
1936: Over the course of three tax rate raises income tax rates range from 4% – 79%.
1945: Over the course of three tax rate raises income tax rates range from 23% – 94%. This time as a withholding.
~~~~ A BUNCH OF STUFF HAPPENS ~~~~
2010: Tax rates range from 10% – 35% (via http://www.irs.gov/pub/irs-pdf/n1036.pdf).
All these facts have come from the official United States Department of the Treasury website, http://www.ustreas.gov/education/fact-sheets/taxes/ustax.shtml. More information can be found at the Library of Congress, or (to save on air fare) their website: http://www.loc.gov/rr/business/hottopic/irs_history.html. Please let me know if you see any errors in my summary.