https://www.armstrongeconomics.com/world-news/taxes/how-the-income-is-destroying-the-world-economy/
by Martin Armstrong
The first income tax was created in 1861 during the Civil War as a mechanism to finance the war effort. In addition, Congress passed the Internal Revenue Act in 1862, which created the Bureau of Internal Revenue, an eventual predecessor to the IRS. The Bureau of Internal Revenue placed excise taxes on everything from tobacco to jewelry. However, the income tax did not last and was not renewed in 1872. In the Springer v. United States 102 US 586 (1881), the Supreme Court upheld the income tax.
Justice Swayne wrote the opinion of the court. The central and controlling question in the case was whether the tax which was levied on the income, gains, and profits was Constitutional since it forbid any direct taxation. The court played games with the words to uphold the government. It wrote: “Our conclusions are that direct taxes, within the meaning of the Constitution, are only capitation taxes, as expressed in that instrument, and taxes on real estate; and that the tax of which the plaintiff in error complains is within the category of an excise or duty.” A Capitation tax is an assessment levied by the government upon a person at a fixed rate regardless of the property, business, or other circumstances. The reasoning used was clearly overruled later which necessitated amending the Constitution in 1913.
Moreover, the Revenue Act of 1862 created a federal estate and gift tax system. Following the end of the Civil War, those taxes were rolled back but the War Revenue Act of 1898 created another death tax to raise revenue for the Spanish-American War.
An 1894 statute was ruled unconstitutional in the case of Pollock v. Farmers’ Loan and Trust Company 157 U.S. 429 (1895) delivered by Chief Justice Fuller. He wrote for the court: ” Whether the void provisions as to rents and income from real estate invalidated the whole act? 2, whether, as to the income from personal property as such, the act is unconstitutional as laying direct taxes? 3, Whether any part of the tax, if not considered as a direct tax, is invalid for want of uniformity on either of the grounds suggested? — the justices who heard the argument are equally divided, and, therefore no opinion is expressed.”
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