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.
- 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.
Thomas C. Hodge, CPA
The Hodge Group
3040 N. Menard Avenue
Chicago, IL 60634