We may associate April 15 with the stress and scrambling that comes with knowing that taxes are due, but Tax Day hasn't always landed on that particular date. In fact, there was no such thing as Tax Day in the U.S. before 1913. That was the year that Congress and a three-fourths majority of the states passed the 16th amendment to the Constitution, giving the federal government power to collect income tax on all U.S. citizens. Prior to 1913, the only time the government collected income tax was during the Civil War, when President Abraham Lincoln appointed a commissioner of Internal Revenue to help fund the ongoing war effort, but the tax was repealed soon after the war ended [source: Internal Revenue Service].
The Federal government needs money (revenue) to pay for everything on its budget. Today, the government spends the vast majority of tax dollars (about 80 percent) on five major budget items:
- National defense and security (20 percent)
- Social Security (20 percent)
- Medicare, Medicaid and the Children's Health Insurance Program(CHIP) (21 percent)
- Safety net programs (14 percent)
- Interest on the national debt (6 percent)
The other 20 percent is split among other investments in education, scientific research, roads and bridges, benefits for federal employees and veterans, and international aid [source: Center on Budget and Policy Priorities].
Before 1913, the government generated revenue chiefly through excise taxes (taxes on the sale of particular goods like alcohol and tobacco) and tariffs on imports. But that still left the government in debt, especially in times of war. Many politicians saw a permanent income tax as the solution. Adding to the momentum for the income tax was increasing income inequality between a few super-wealthy industrialists and the common worker [source: Tax History Museum]. Congress passed a bill in 1894 establishing an income tax of 2 percent on income above $4,000, but the law was struck down by the Supreme Court as unconstitutional. It took the 16th Amendment to overcome the Court's opposition.
What did the 16th Amendment accomplish? Find out on the next page.