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In the US, the first income tax was introduced during the Civil War but later on it was revoked. Then again in the 1890s, it was reintroduced. However, the present income tax is part of the Sixteenth Amendment, which was ratified in 1913.
In the United States, income tax was started as a means to help the government pay for the American Civil War. The first personal income tax was imposed on August 5, 1861 as part of the Revenue Act of 1861. Incomes over $800 were taxed 3 percent. However, income tax was abolished in 1872.
During the initial period of taxation, there were no forms. Every individual or business had to declare their own income. The tax system was abolished because the wealthy Northeast manufacturers, who were the Civil War’s major taxpayers, had enough power with the Congress to replace income tax with protect tariffs to protect their manufactured goods.
However, the surprise is that abolishing income tax made other states angry. These were the state that did not use the manufactured goods produced by the Northeast. In addition, these states were poorer than the states in the Northeast. They called for the income tax system to be reintroduced thinking that they would not have to pay as only the rich would be taxed.
This led to a new income tax law being introduced in 1894, which was declared unconstitutional in 1895 by the Supreme Court. The court felt that the tax was not being assessed proportionally among all the states of the United States.
As income tax was revoked, tariffs on goods immediately increased and this let to increase in prices, and high cost of living. The pro-tax states decided to amend the Constitution and this saw the Sixteenth Amendment being introduced, and under its provisions and various other acts related to income tax, we pay our taxes in present day.
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