Believe it or not, the federal government operated for about 150 years without an income tax
Imagine opening your newspaper or Web browser and seeing the following headline: “Supreme Court declares income tax unconstitutional.” (Now imagine cleaning up the mess you made after reading this headline and doing a vaudeville “spit take” with your coffee.)
It probably seems farfetched, but America’s court of last resort dropped this very bombshell in 1895.
The legal battle represents just one chapter in the story of the federal income tax, which began in the Civil War era. Congress approved a version of the income tax in 1861 but neglected to set up the actual mechanics of collecting it. An unnamed staff historian for the Internal Revenue Service who researched the income tax’s history several years ago wrote that “the original deadline for filing income tax returns of June 30, 1862, established by this law came and went with no tax returns filed nor any tax collected.”
We must assume that had it existed in 1862, not even the IRS would’ve undertaken the task of prosecuting every single American for tax evasion.
Nevertheless, the government pressed forward. Shortly after the 1862 deadline expired, Congress passed a law requiring taxpayers to make a “return of the amount of his annual income to the assistant assessor of the district in which he or she resides” by the first Monday in May. In 1872, however, all income taxes enacted during the Civil War period expired and the government went back to customs revenues and excise taxes as its main sources of money.
Officials tried to revive the income tax in the 1890s, leading to the aforementioned rejection by the Supreme Court. It took the passage of the 16th Amendment, which allowed the government to tax incomes without regard to equitable distribution among the states according to population, to answer the questions about the tax’s constitutionality. The amendment became part of the Constitution on Feb. 25, 1913, and on Oct. 3 of that year the 1040 form was born.
So, in case you were wondering, Washington operated without the benefit of income taxes for nearly 150 years. During that time, the federal government somehow managed to build and maintain a legislative and legal framework for a developing country, plus fight a few wars.
Of course, the folks who regard taxes as some sort of cover charge for democracy might respond, “Yes, but think about how much bigger the government is now — it has its hands in everything from education to health care.”
We’re not saying Washington could or should turn back to clock to a previous century. We’re simply suggesting that a government that concentrated on the core responsibilities intended by the Founders would require far less operating capital — by which we mean your capital.
And, on that note, Happy April 15. May the lessons of history not be lost upon us, including the history of the income tax.