Enmired in a civil war, the federal government of the United States was wanting for funds. The answer the government arrived at was to impose an income tax. Before this happened though, President Lincoln actually met with his cabinet to determine whether or not such a tax was constitutional. Lincoln’s hesitation should speak volumes.
The first income tax was 3% and was only imposed on those who had incomes over $800, or around $20,000 in today’s money. This actually worked out to the income tax only applying to about 3% of the population in the north.
Things were not to last. The first income tax was repealed and replaced with another one. All in all, the United States had an income tax for a period of ten years. From our modern-day perspective, we know that this is not the last of the income tax. There was a 2% income tax issued during peacetime in 1894, but it was struck down as being an unapportioned direct tax the following year by the Supreme Court in Pollock v. Farmer’s Loan & Trust Co. However, In 1913, the 16th Amendment was ratified and income tax has been a fixture of America’s tax system ever since.