The Sixteenth Amendment -- Federal Income Tax

Few citizens know that the U.S. government gets its authority to impose an income tax not from any law, but from the Sixteenth Amendment, proposed in 1909 and ratified in 1913. The Internal Revenue Service (IRS) collects over $700 billion a year from the personal income tax, making this tax the federal government's single largest source of revenue. Prior to the passage of the Sixteenth Amendment, the federal government relied primarily on tariffs, excise taxes (taxes on items like gasoline or alcohol) and property taxes to raise revenue. State and local governments, on the other hand, relied on sales and property taxes as revenue sources. A few states also imposed income taxes.

While complaining about high taxes is something of a national pastime today, in the early 20th century many Americans actually favored the adoption of a federal income tax. Believing that the federal government's use of tariffs hurt farmers and drove up food prices -- which disproportionately affected the poor -- supporters of the income tax wanted it to be progressive. Under a progressive tax system, those with higher incomes pay a higher tax rate.

Today, tax policy continues to be fiercely debated, with some citizens even sponsoring a constitutional amendment to repeal the federal income tax. In 2001, Congress enacted a package of tax cuts totaling hundreds of billions of dollars, but many Democrats argue that the Republican-sponsored legislation favored the wealthy at the expense of middle- and lower-income taxpayers. In response, Republicans contend that those who pay more taxes should receive a larger share of tax cuts. It's highly unlikely that this debate will soon be resolved, but it is equally certain that the income tax is here to stay.