100 Years of Federal Income Tax


On October 3, 1913, President Woodrow Wilson (who was considered a “Progressive Democrat”) signed into law a bill that started the Federal Income Tax.  The 16th Amendment to the US Constitution that allowed a Federal Tax not apportioned among the states or based on the US Census, was adopted on February 3, 1913 after being ratified by the states.

Some facts about the 1913 tax:bag_of_money

  • Net income was taxed between $20,000 and $50,000 at 1% with a few more graduated levels, until $500,000 was reached and all income above $500,000 was taxed at 6%.
  • Individuals were allowed to deduct interest on personal debts, as well as state & local taxes.
  • The Standard Deduction was $3,000 for single filers and $4,000 for married filers.  For 2013, the amounts are $6,100 and $12,200 respectively.
  • Only an estimated 1% of households paid income tax that year.
  • The tax form was 3 pages long – one page each for income, deductions and tax calculations.
  • One additional page of instructions (20 instructions) was included in your tax packet.

Only five years later, with the end of World War I  drawing to a close, the top income tax rate was 77% on net income of $1 million and up.  Certainly didn’t take long to add pages, new rules and tax rates.

How far we’ve come!  Please send me your thoughts/comments/questions below.

Cheers!

Thomas C. Hodge, CPA
President

The Hodge Group
3040 N. Menard Avenue
Chicago, IL 60634

773.237.6369

www.thehodgegroup.com

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