US Federal Government’s First Personal Income Tax (1861)

US Federal Government’s First Personal Income Tax (1861)

US Income Tax 1866

The US federal government imposed the first personal income tax, on August 5, 1861, to help pay for its war effort in the American Civil War – (3% of all incomes over US$800).

It was only in 1894 that the first peacetime income tax was passed through the Wilson-Gorman tariff. The rate was 2% on income over $4000 (equivalent to $110,000 in 2016), which meant fewer than 10% of households would pay any. The purpose of the income tax was to make up for revenue that would be lost by tariff reductions.

In 1913, the Sixteenth Amendment to the United States Constitution made the income tax a permanent fixture in the U.S. tax system. Congress re-adopted the income tax in 1916, levying a 1% tax on net personal incomes above $3,000 and a 6% surcharge on incomes above $500,000. By 1918, the top rate of the income tax was increased to 77% on income over $1m to finance World War I.

Posted in ,

Similar posts you may like

  • The Glove Tax of 1785

    As Britain’s 1784 tax on hats was such a lucrative revenue raiser for the government, they decided to complement it with a glove tax. Read more

  • Debt Recycling

        Debt recycling is a three-tiered financial strategy that aims to generate future wealth, reduce the home loan, and minimise tax. Debt recycling Read more

  • Farm discretionary trust

      Farm discretionary trusts are used to acquire land for primary production while also providing flexibility so the property can eventually be transferred to Read more

  • Tax planning has evolved – has your firm kept up?accounting technology

    Over the past two decades, accounting technology has transformed every aspect of practice management. Financial statements, budgeting, and tax returns are now automated and Read more

"You’d be stupid not to try to cut your tax bill and those that don’t are stupid in business"

- Bono: U2