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When Did Congress Start Income Taxes ?

When Did Congress Start Income Taxes ?

Centuries ago, the Congress needed money to fund the Civil War fought between the different groups in the country. Taxes were levied after the Revenue Act of 1861, which became effective on August 15, 1861. During this time a person with an annual income of six thousand to ten thousand dollars had to pay three percent of their total income in taxes.

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People earning more than ten thousand dollars had to pay a higher percent than the above mentioned income bracket. However, after a time, the Congress stopped collecting taxes when the war came to an end.

The Congress stopped collecting income tax in 1872 when they started collecting internal taxes from tobacco and distilled spirits. It was later, in the 1890s, that the Congress started collecting taxes again. It was finally after 1913, that taxes were made mandatory after the sanctioning of the Sixteenth Amendment in the Constitution. Levying taxes was declared to be unconstitutional. This gave the Congress legal authority to collect taxes from individuals and businesses.

The taxes that were collected at that time were only one percent of the net income, and were only collected from those who earned around or above three thousand dollars. People and organizations who earned more than five hundred thousand dollars paid seven percent of their earnings in taxes. During the First World War taxes rose to seventy-seven percent which continued till the Second World War.

The Internal Revenue Code was amended in 1986 in the Tax Reform Act, which is still followed by the Congress today. The percentage set then was twenty-eight, and it increased to thirty-nine percent in the 1990s. Finally, in 2001 it was reduced to twenty-eight percent in accordance to the Economic Growth and Tax Relief Reconciliation Act.

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