Exactly a century ago, on October 3, 1913, President Woodrow Wilson signed the first modern federal income tax into law. The sky did not fall.
That may have surprised the eminences of the American plutocracy. For years they had predicted the most dire of consequences should the federal government begin taxing the incomes of America’s most comfortable.
Those warnings took a shriller turn in 1909. A flurry of cynical congressional maneuvers sent the states a constitutional amendment, ostensibly designed to allow a federal income tax. Conservatives in Congress felt confident that the amendment had no chance of gaining enough state support to be ratified. To clinch the amendment’s defeat, they unleashed a fierce rhetorical fusillade.
Friends of grand fortune would reserve a special venom for the notion of “progressive” taxation — the idea that high incomes should face the highest tax rates. They characterized a “graduated” tax on the incomes of America’s affluent as “extortion,” a “penalty upon ability and intelligence” and an imposition on a “small class of people powerless to defend itself.” Taxing the wealthy, they contended, would be “killing the goose that laid the golden egg.”
In the Virginia House of Delegates, Speaker Richard Byrd predicted that an income tax would put freedom itself in jeopardy. Any new income tax law, Byrd charged, “will of necessity have inquisitorial features.”