The Constitution of the United States gives Congress the sole right to levy federal taxes. Congress first used its tax powers in 1789, when it began to levy a tariff. Tariffs were the chief sources of federal revenue until the outbreak of the American Civil War in 1861. Then the cost of the war prompted the government to levy a series of excise taxes and other new taxes.
In 1894, the federal government levied a tax on individual incomes. But the tax was abolished in 1895 because it violated a section of the Constitution that required any direct tax to beapportioned (divided) among the states according to population. In 1913, the 16thAmendment removed this restriction. Later that year, the first modern income tax took effect.
During the early 1900’s, the income tax became the main source of federal revenue. Local governments relied chiefly on property taxes. State governments also depended heavily on property taxes during the early 1900’s. But by the 1930’s, state governments received a rapidly growing percentage of their tax revenue from income taxes and sales taxes.
During the Great Depression of the 1930’s, the role of the federal government grew tremendously. The new Deal program of President Franklin D. Roosevelt greatly increased federal services and activities in order to help bring economic relief to the country (see New Deal).
The federal government continued to expand its activities during and after World War II (1939-1945). As a result, the nation’s tax system also grew to pay for the new federal programs. For example, during the 1920’s, revenue from local taxes was about half of the total U.S. tax revenue. But today, local taxes account for only about a sixth of the country’s tax revenue, while federal taxes account for about two-third of the total. The main federal taxes are individual and corporate income taxes and Social Security contributions. Some revenue from these taxes goes to state and local governments to finance such project as road building and public housing.
In 1894, the federal government levied a tax on individual incomes. But the tax was abolished in 1895 because it violated a section of the Constitution that required any direct tax to beapportioned (divided) among the states according to population. In 1913, the 16thAmendment removed this restriction. Later that year, the first modern income tax took effect.
During the early 1900’s, the income tax became the main source of federal revenue. Local governments relied chiefly on property taxes. State governments also depended heavily on property taxes during the early 1900’s. But by the 1930’s, state governments received a rapidly growing percentage of their tax revenue from income taxes and sales taxes.
During the Great Depression of the 1930’s, the role of the federal government grew tremendously. The new Deal program of President Franklin D. Roosevelt greatly increased federal services and activities in order to help bring economic relief to the country (see New Deal).
The federal government continued to expand its activities during and after World War II (1939-1945). As a result, the nation’s tax system also grew to pay for the new federal programs. For example, during the 1920’s, revenue from local taxes was about half of the total U.S. tax revenue. But today, local taxes account for only about a sixth of the country’s tax revenue, while federal taxes account for about two-third of the total. The main federal taxes are individual and corporate income taxes and Social Security contributions. Some revenue from these taxes goes to state and local governments to finance such project as road building and public housing.
