A Short History of US Income Tax

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John Steele Gordon, A Short History of the Income Tax. One original sin was the separation of teh corporate and personal tax, giving lawyers, caccountants and the wealthy a chance to game teh system. Wall Street Journal, Sept 27, 2011.
http://online.wsj.com/article/SB10001424052970204422404576594471646927038.html

Note:
(a) The essay states, "After the Civil War, nearly all the wartime taxes--including teh nation's first income tax--were repealed."

Taxing income above $600 a year (about $10,000 today), that federal income tax lasted from 1961 to 1972 (inclusive).
(b) The essay says, "The case turned on the definition of a 'direct tax,' which the Constitution requires to be apportioned equally among the states according to the population, something impossible with an income tax."

Article 1, Section 2, Paragraph 3 of teh federal constitution starts with:

"Representatives and direct taxes shall be apportioned among the several states which may be included within this union, according to their respective numbers, which shall be determined by adding to the whole number of free persons, including those bound to service for a term of years, and excluding Indians not taxed, three fifths of all other Persons.

(c) The essay mentions "the Progressive wing of the Republican Party grew strength under Theodore Roosevelt."

(i) Theodore Roosevelt
http://en.wikipedia.org/wiki/Theodore_Roosevelt
(1858-1919; US president 1901-1909; his leadership of the Progressive Movement)

Both he and his successor William Howard Taft were Republicans.
(ii) Progressive Era
http://en.wikipedia.org/wiki/Progressive_Era
(from the 1890s to the 1920s; One main goal was eliminate corruption; A second theme was achieving efficiency; imposition of an income tax with the Sixteenth Amendment)
(d) The essay remarks about Mr Taft, "He came up with a brilliant, very lawyerly alternative: He proposed a constitutional amendment to legalize a personal income tax, while meanwhile imposing a tax on corporate profits. * * * As the corporate income tax was technically an excise tax, there was no constitutional problem."

(i) Mr Taft attended Yale College and Cincinnati Law School.
(ii) Corporate tax in the United States
http://en.wikipedia.org/wiki/Corporate_tax_in_the_United_States
(A corporate income tax was enacted in 1894, but was shortly held unconstitutional. In 1909, Congress enacted an excise tax on corporations based on income. After ratification of the Sixteenth amendment to the U.S. Constitution, this became the corporate provisions of the Federal income tax.)

(e) Sixteenth Amendment to the United States Constitution states in toto: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
(f) S Corporation
http://en.wikipedia.org/wiki/Subchapter_S_corporation
(a corporation that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. In general, S corporations do not pay any federal income taxes. Instead, the corporation's income or losses are divided among and passed through to its shareholders. The shareholders must then report the income or loss on their own individual income tax returns)
(g) My comment: In the days leading to the passage of the Sixteenth Amendment, politicians promised that only the SUPERRICH would be taxed. Americans then did not know the tax one day would befall almost all of them (except the poorest).



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