Although the federal government had successfully operated without an income tax for 124 years under the Constitution, the American people in 1913 chose to ratify the Sixteenth Amendment, giving Congress the “power to lay and collect taxes on incomes, from whatever source derived.” It is reasonable to expect that the people would not have granted such a broad power to the federal government unless circumstances required it. So what prompted this desperate action? Why was an income tax suddenly necessary in America 100 years ago?
In truth, it wasn’t needed at all. Total federal tax revenue was at an all-time high in 1913, and tax receipts that year were almost 25 percent higher than they were in 1909, the year Congress submitted the Sixteenth Amendment to the states for ratification.
Moreover, there was no debt crisis. In 1909, the national debt was only 8.2 percent of the gross domestic product (GDP). By 1913, the debt-to-GDP ratio had actually dropped to 7.5 percent. In comparison, the nation’s debt-to-GDP ratio in 1791 was 37 percent, which resulted from the federal government’s assumption of all state debts incurred during the Revolutionary War. And despite this large debt, the federal government succeeded in paying it off entirely by 1835, without a tax on income.
Given the manageable national debt and rising tax receipts in 1913, there really was no need for another source of federal revenue, and many proponents of the income tax didn’t even speak of its necessity in that day. They instead argued that the tax might prove useful in some future, unspecified situations. Senator Norris Brown, who was the first to propose the Sixteenth Amendment in Congress, opined that the income tax might be wielded only “in national emergencies” or “when necessary to the life of the republic.” He further said, “Whether the [income-tax] power shall be exercised, when it shall be exercised, or whether it shall be exercised at all, are other questions entirely aside from the question of whether the government shall be vested or stripped of the power.” In essence, many supporters of the income tax viewed it as a tool of convenience for the federal government—a power to be used infrequently, if ever, with a limited impact on the people.
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