Did you know that, at one point in American history, income tax was deemed unconstitutional?
Prior to the Civil War, the economy relied on taxes from products like
tobacco, spirits, precious stones, jewelry, and property. It would've been the
case for a longer time, if not until now, had it not been for the decision to
rely on tariffs for income from these products. When the Union and the Confederacy
started taking pot shots, the Union needed a new source of revenue.
This resulted in America's first income tax law in 1862, where people
earning between $600 and $10,000 ($14,300 and $239,000 in today's dollars) were
taxed at a rate of 3 percent. This, along with other taxes, helped internal
revenue swell to $310 million. It's a feat that wouldn't happen a second time
until 1911.
The problem at the time was that social activists weren't going to take
this sitting down. Pollock v. Farmers' Loan
and Trust Co. represented the struggle of the income tax's viability at the
time. The plaintiff argued that, since both the Constitution and federal
government had powers to tax their people directly, the tax wasn't apportioned
properly, as it should've been.
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