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History

Although several countries in Europe, including France and Great Britain, had begun a personal income taxation system in the 1700s, the United States did not adopt an income tax until 1862, during the Civil War. A few years later, however, this wartime measure was repealed.

In 1894 Congress tried again by initiating a two percent tax on individual and corporate income. But in 1895 the Supreme Court declared the levy unconstitutional. Article 1 of the U.S. Constitution states that "direct taxes shall be apportioned among the several states." Direct taxes are those which are levied on the property, business, or income of the individual who pays the tax. The Court ruled that the U.S. Constitution prohibited the federal government from enacting an income tax because revenue derived from the tax would not be distributed in direct proportion to the nation's population.

It would take the ratification of the...