The Real History of the U.S. Income Tax

income tax 4097292 640The Real History of the American Income Tax -Magness/
"The 70 percent income tax scheme of Rep. Alexandria Ocasio-Cortez and the closely related wealth tax proposal of Sen. Elizabeth Warren would take federal taxation into historically unprecedented territory....To advocates of these policies such as economists Thomas Piketty, Emmanuel Saez, and Gabriel Zucman, they simply seek to restore an allegedly lost progressive legacy of high income taxation from the early and middle twentieth century....

The federal income tax came into being after the ratification of the 16th Amendment in 1913, but its purpose had little to do with 'correcting' income inequality. Rather, the income tax's origins trace to an obscure debate over another issue that's seen a resurgence of attention in recent years, the protective tariff. The story of the 16th Amendment begins in early 1909 after President Taft called upon Congress to revise the existing tariff schedule of the U.S. Tariffs at the time were technically a revenue generator. Before the income tax, import taxes actually provided the largest share of the federal government’s revenue stream....By 1909, battling directly over tariffs meant certain failure. Shortly after Sen. Aldrich brought his tariff bill to the Senate floor in April 1909, Democratic Sen. Joseph Weldon Bailey of Texas decided on a bold alternative strategy. Rather than attack the tariff head-on and ensuring their defeat...He proposed a parallel federal income tax, aiming to partially 'swap' this new source of tax intake for the revenue stream that came from tariff assessments....In order to peel enough votes away from Bailey's competing income tax bill, Aldrich had to offer a consolation prize. In exchange for other senators' abandoning the Bailey plan, he would permit a constitutional amendment to come to the floor in its place, thereby resolving the obstacles to income taxation caused by the 1896 Supreme Court ruling and avoiding the need for another future court challenge on the subject. From these obscure origins in turn-of-the-century tariff politics, the 16th Amendment was born....Income tax history provides many lessons on both the effects and perils of high tax rates. Foremost among these is a tendency to incentivize tax avoidance behavior by the wealthiest earners."