Did you know the U.S. government once forbade a federal income tax — and that the nation mostly brought in monies through excise taxes and other related means?
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As millions of Americans prepare and await their tax returns, historian William Federer is taking some time to break down the strange and fascinating history behind the federal income tax.
Federer, author of “The Interesting History of Income Tax,” told CBN News the Civil War was the first time there was a federal income tax in America.
“Once the Civil War started with the Confederates firing at Fort Sumter, South Carolina secedes [and] guess what? There’s no federal money coming in,” he said. “Prior to the Civil War, 90% of the federal government was financed through tariff taxes, mostly collected at southern ports, and, so, when the South seceded, there [was] no more tariff income coming in, and the federal government was like, ‘Where do we get our money?'”
At this point, President Abraham Lincoln pushed through an emergency income tax and raised millions to finance the war — an act that came to a close once the war ended and the emergency was effectively over.
“There was no emergency and so the income tax was repealed,” Federer said. “So, yes, there was no federal income tax until the Civil War.”
It wasn’t until 1892 that the income tax returned, this time during a time of peace. But Federer said it made its way through the Supreme Court and was declared unconstitutional in the 5-4 Pollock v. Farmers’ Loan & Trust Co. decision.
But that was hardly the end of the story, as President Teddy Roosevelt pushed through the inheritance tax and then President William Howard Taft became an architect for the income tax.
Taft supported the passage of the 16th Amendment in 1913, which established the federal income tax.
Watch Federer explain the full history:
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