Introduction

Most Americans are required to pay income taxes annually, with failure to file returns to the Internal Revenue Service (IRS) potentially resulting in imprisonment. In the 21st century, taxation extends far beyond income, encompassing sales tax, social security contributions, gasoline taxes, and capital gains taxes, to name a few. However, the income tax remains the most widely recognized form of federal taxation. Tax rates have varied based on income levels throughout history. As of 2025, the rate starts at 10% for incomes up to $11,600 and reaches a maximum of 37% for incomes of $609,351 or more. Since 1913, income tax rates have fluctuated dramatically, peaking at 94% in 1944 for incomes exceeding $200,000.[1]

Before 1913, with the exception of a temporary measure during the American Civil War, the United States had no federal income tax. It was the ratification of the 16th Amendment on February 3, 1913, that authorized Congress to impose such a tax.[2] Ratifying a constitutional amendment requires either two-thirds approval in both the House of Representatives and the Senate, followed by ratification by three-fourths of the states, or a constitutional convention called by two-thirds of state legislatures—the former method was used for the 16th Amendment.[3] In today’s political climate, where income taxes and the IRS face significant unpopularity, passing a similar amendment seems improbable. However, the federal tax system was markedly different a century ago. The 16th Amendment emerged from long-standing political debates over tariffs, which had been one of the most contentious issues in the first 120 years of the nation’s history. It marked the first addition to the U.S. Constitution since the Reconstruction-era amendments 43 years prior.

Pre-1913 Federal Revenue: Reliance on Tariffs and Excise Taxes

Prior to the 16th Amendment’s ratification, the United States primarily funded its operations through tariffs and excise taxes, with the first tariff legislation enacted in 1789.[4] Excise taxes during this era were modest and applied to a limited range of goods, including whiskey, tobacco, rum, and refined sugar. These domestic excise taxes could provoke strong opposition; a notable example is the Whiskey Rebellion of 1791, where western Pennsylvania farmers protested a tax of 6 to 18 cents per gallon on whiskey, intended to repay Revolutionary War debts. Consequently, tariffs became the dominant source of federal revenue, accounting for 90% of government income from 1790 to 1860.

Tariffs served dual purposes: generating revenue and protecting nascent American manufacturing. In 1790, the young nation and its industries were vulnerable to European imports. Alexander Hamilton’s Report on Manufactures, issued that year, advocated for protective tariffs to foster economic independence from foreign powers.[5] The Tariff Act of 1790 introduced protective duties, though rates were relatively low compared to later increases.[6]

Over time, tariffs grew more protective. The War of 1812 prompted significant hikes, with the 1812 tariff doubling duties across the board and adding a 10% surcharge on goods imported via foreign vessels. These measures were temporary, set to expire one year after peace with Great Britain. New England opposed these high tariffs due to their impact on shipping and commerce. Following the Treaty of Ghent, the Tariff of 1816 was enacted as a protective measure aimed at self-sufficiency, though some described it as moderate. The nation then endured a severe depression from 1817 to 1824, attributed not to high tariffs but to the abrupt shift from wartime rates, leading to widespread industrial stagnation and bankruptcies, as noted by former Speaker of the House James Blaine in his book Twenty Years of Congress.[7]