How has the tax code evolved?
Our modern tax system has its roots in the Civil War. To help fund the Union war effort, President Abraham Lincoln signed the first federal income tax into law in 1861, a temporary flat tax of 3 percent on annual incomes above $800. The next year, Congress created what would become the Internal Revenue Service. The wartime income taxes were never meant to be permanent, and lapsed in 1872. When Congress passed another income tax in 1894, it was ruled unconstitutional by the Supreme Court in a 5-4 vote. A progressive income tax became a cause célèbre among progressive-era reformers fighting the gaping inequality of the Gilded Age, leading to the passage in 1913 of a constitutional amendment—the 16th— legalizing federal taxation. Congress imposed the first permanent income tax the same year, with a top rate of 7 percent on annual incomes above $500,000—about $12.5 million today.
Reagan signing the 1986 bipartisan tax bill