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The History of Income Tax In the United States

The first tax on income was created in 1861 to finance the Civil War. Congress also passed the Internal Revenue Act in 1862 which created the Bureau of Internal Revenue which eventually became the IRS. The Bureau initially placed excise taxes on goods ranging from tobacco to jewelry, but it did not last and wasn’t renewed in 1872. The Revenue Act also created a federal estate and gift tax. After the end of the Civil War, the estate and gift tax was reversed but to raise money for the Spanish-American War, in 1898 another death tax was enacted.

Congress passes the Wilson-Groman tariff in 1894, which was a tax on income of 2% for earnings over $4,000, but the Supreme Court overturned the tax the following year.
In 1913, the 16th Amendment was ratified to the Constitution which granted the power for Congress to collect taxes on personal income.

The first IRS form was the 1040, which is still in use today but is re-issued annually. A test run was conducted where people sent in their forms to the bureau to check for accuracy but did not have to pay any tax. In 1915, Congress expressed concerns that the 1040 form was complex and too difficult to prepare!

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