Theme 2: Taxes in U.S. HistoryLesson 1: Evolution of Taxation in the Constitution

Before the U.S. Constitution was ratified in 1788, the federal government lacked the power to raise revenue directly. Even after the Constitution was ratified, federal revenues came mostly from tariffs and excise taxes. These taxes tend to be regressive, because people with lower incomes had to pay a higher percentage of their income than did people with higher incomes.

During the Civil War, the federal government required much more revenue than the tariffs and excise taxes could provide. A tax on income was established in 1862 but was abolished after the war. The ratification of the Sixteenth Amendment in 1913 gave Congress the right to levy and collect income taxes. Income taxes tend to be progressive because they tax a larger percentage of income from high-income groups than from low-income groups.

The goal of American lawmakers has always been to balance the need to raise revenue, the desire to be fair to taxpayers, and the desire to influence the way taxpayers save and spend their money.