How the federal income tax affected Prohibition

How tax laws helped the federal government catch mob bosses during Prohibition

The IRS arrested top mob bosses during Prohibition after the Supreme Court ruled illegally-made income could be taxed. The IRS's biggest catch was Al Capone, who was charged with tax evasion and sentenced to 11 years in prison. But Capone wasn't the only bootlegger the IRS nabbed for tax evasion during this era.

In the 1920s, Prohibition helped cement tipping norms in the US

During Prohibition, restaurants lost significant revenue, given that they could no longer legally serve customers high-margin alcohol. As a result, many of these restaurants leaned more heavily on tips to ease the financial pressure of paying employees.

The federal government allowed toxic chemicals into alcohol during Prohibition

Industrial alcohol was still legal during Prohibition, and was often used by bootleggers. In an attempt to disrupt the black market, the government required toxic additives to be included in industrial alcohol, leading to more than one death.

The US officially adopted an income tax in 1913

The US first levied income taxes during the Civil War, but modern income taxes became an American fixture in 1913. Two years earlier, Congress passed the 16th Amendment to give the government the right to tax individuals' and businesses' income. The US still technically levies the same federal income tax now as it did then—though it's evolved.

The 21st Amendment was the only amendment to repeal another

The 1933 constitutional amendment rolled back 1920's 18th Amendment, better known as Prohibition, which outlawed "the manufacture, sale or transportation of intoxicating liquors."

Before the 16th Amendment, US tax law required direct taxes to be directly apportioned to a state's population

Due to these requirements, the federal government could not impose many direct taxes. Direct taxes include property and income taxes, whereas indirect taxes include duties and excises.

How Prohibition changed beer

This historical survey from The Beer Connoisseur explores the breweries that survived the government's ban on alcohol production. The common denominator? They all pivoted their business models.

Hamilton's tax on whiskey sparked the first armed rebellion against US federal authority

As Treasury secretary, Alexander Hamilton designed an excise tax on whiskey that provoked violent resistance in western Pennsylvania. The Whiskey Rebellion ended when George Washington mobilized state militias under federal authority to enforce the law.

Tariffs once fueled the US economy

US tariffs peaked in 1930 with the Smoot-Hawley Tariff Act, which slashed global trade by 65%. Once a key revenue source, tariffs gave way to income taxes in 1913, leading to decades of lower trade barriers. Today, US tariffs remain among the lowest worldwide.

See how the federal estate tax has changed in the 21st century

In 2001, the government passed an act to completely repeal the tax. It was overturned in 2010. In 2017, the government increased the exemption threshold so fewer people would have to pay into the tax. In 2025, the exemption threshold was permanently set to $15M.

Hear why the IRS has been a frequent victim of arson

This podcast episode takes a lighthearted dive into the history of the IRS, from when the agency was founded and called the Bureau of Internal Revenue, to that one time it had to enforce a national ban on alcohol.

Charting where federal revenue comes from

About 50 percent of federal revenue comes from individual income taxes, 7 percent from corporate income taxes, and another 36 percent from payroll taxes that fund social insurance programs. See breakdown in charts here.

Jimmy Carter signed a 1978 bill that legalized home brewing, a move credited with kick-starting the craft beer industry.

America's ice cream obsession began under Prohibition

The emotional attachment to the sweet treat began during Prohibition, when many brewers started churning out ice cream instead of alcohol. Eventually, it symbolized joy during wartime and the Great Depression.

Happy hour is banned in Ireland

For a country famous for drinking a lot of alcohol, it might seem surprising that happy hours are banned in Ireland. But that reputation is exactly why the country banned happy hours in the first place—a 2010 report found that alcohol use in Ireland had doubled between the 1970s and the early 2000s. Read this article to learn more.

The Budget and Accounting Act of 1921 created the modern federal budget

Before 1921, federal funding was fragmented and ad hoc. This article traces how inefficiency and postwar pressures led Congress to pass the Budget and Accounting Act, creating a standardized, centralized federal budgeting process.

Why do long-term capital gains get taxed at preferential rates?

The 1920s defined capital gains as “unearned” taxable income—as opposed to “earned” income from jobs—and set into practice preferential tax rates for long-term capital gains that are hotly debated to this day. This historical review explores how voices in favor of preferential rates were arguing on behalf of greater market liquidity and incentive for investment activity. Learn more about the real history of capital gains tax rates here.

US states have reported over $25B in tax revenue from recreational cannabis sales and medical marijuana

Colorado and Washington became the first states to allow the sale of cannabis products in 2014. Since then, many more states have legalized marijuana in some capacity—and it's been a boon for state budgets. California now regularly collects more than $1B in marijuana tax revenue each year, for instance.

JP Morgan Jr. once angered the nation with his zero-dollar tax bill

In the aftermath of the Great Depression, Congress learned that Morgan and his banking partners had avoided paying any federal income tax in 1931 and 1932. By claiming their losses in the stock market, they seemingly erased what they owed.

Tax policy can have a direct impact on the national debt

Past presidents' changes to tax codes have inflated the deficit. An expert on the topic explains the interplay between policy and the national budget while debunking 10 tax-related myths in this podcast.

US inflation can generally be split into to two periods—before and after the Federal Reserve

A central bank itself does not mean significant inflation will occur, but economists generally point to factors like two world wars and the printing of money to finance the US federal deficit as primary drivers of price increases.

Calculate how much of your tax dollars go to each federal program based on your income, filing status, and number of children

A 1912 congressional bill attempted to prohibit fake photos in the US

In the 1800s, photographs were held up as indisputable resources of truth. But the photography industry devised ways to alter photos, resulting in the rise of fraudulent photos—from shots with celebrities to the turn-of-the-century version of fake nudes—prompting government intervention.

The numbers on US wine consumption

Ever wonder how much wine the average American drank in 1949? Wonder no more! The answer is 0.89 gallons. That’s way less than 2022, where the number has quadrupled to 2.86 gallons. Check out this simple table that tracks average United States wine consumption from 1934 through 2022, by individuals and as a whole. American wine consumption peaked during the early pandemic but has lessened since then.

The New York Stock Exchange wouldn't have been made if not for municipal bond sales

The Funding Act of 1790 nationalized and consolidated the debt held by the 13 colonies to be sold off in the form of bonds.

The price of gas is a composite made up of several different factors, with the federal gas tax making up less than 20% of what drivers pay at the pump.

The New Deal shifted economic and social authority to the federal government

Franklin D. Roosevelt's response to the Great Depression expanded federal power through economic regulation and social welfare programs, permanently reshaping federalism by shifting responsibility for financial security to Washington while leaving states to administer many of these programs.

In 1992, sports betting was outlawed in places where it wasn't already legal

On Oct. 29, 1992, then-President George HW Bush signed the Professional and Amateur Sports Protection Act, outlawing sports gambling where it was not already legal.

The idea for the Federal Reserve was conceived in secret in 1910—with bankers donning duck hunt gear for disguise while traveling to a remote country club on Georgia's Jekyll Island

Roughly 43 million US borrowers owe roughly $1.7T in student debt, the second-largest source of consumer debt behind mortgages.

At the beginning of the 20th century, a group of young men ate standard American food—replete with food additives like borax and formaldehyde—as part of government research to better understand food safety.

70 years ago today, city officials in Santa Cruz, California, banned rock 'n' roll to protect its youth from corruption after witnessing a 'provocative' concert the night before.

After the Boston Tea Party, colonists switched to coffee, which became the main morning drink for revolutionaries.

The US Constitution is widely regarded as the longest-standing written national constitution still in force—see how it has influenced rights worldwide.

The rivalry between Alexander Hamilton and Thomas Jefferson centered on federalism—the question of how much power the federal government should hold relative to the states.

See this overview of the firework rules across all 50 states, ranging from a complete ban on non-professional fireworks in Massachusetts to states with more lax rules like Indiana.

Mark Twain spent decades feuding with the US Postal Service, convinced its costs and regulations were bureaucratic overreach.

The story of Dollree Mapp, whose legal challenge over her 1957 conviction for possessing "obscene material" led to a major strengthening of the Fourth Amendment

Art theft is the third-largest source of criminal revenues worldwide, thanks in part to the subjective nature of valuing a work of art.

Long before Major League Baseball began allowing instant replay for balls and strikes, an umpire reluctantly used the technology to determine whether a hit was a home run, a move that inadvertently ushered in a new era for the sport.

The United States has had a tumultuous relationship with Cuba since its 1959 revolution, highlighted by a nuclear crisis and a decades-long trade embargo.

Before the current East Wing ballroom project, only two White House renovations in the past 100 years cost more than $10M.

Abraham Lincoln was almost assassinated weeks before his inauguration as he traveled from Illinois to DC through Baltimore in 1861; it took two independent claims for Lincoln to be convinced the threat was real

An initial public offering or 'IPO' is the process of a private company becoming public by putting shares of the company on the stock market for purchase.

Scientists testing how climate change affects plants found, in a years-long simulation study, that poison ivy grew 70% faster with the resulting extra carbon dioxide.

Dozens of S&P 500 stocks, including Coca-Cola and Walmart—known as the dividend aristocrats—have increased dividends every year for 25 years

Fast-casual restaurant Chili's is experiencing a resurgence, with its parent company recently reporting a nearly 32% increase in sales, thanks to passionate Gen Z fans on TikTok.

Pure water does not conduct electricity because this flow of energy requires the movement of charged particles, and water is a neutral molecule.

For centuries, Niagara Falls has been a magnet for daredevils seeking to conquer one of nature's most powerful wonders, with its 200-foot drop and water rushing at 32 feet per second with 280 tons of force.

A small portion of The Winstons' 'Amen, Brother,' an obscure '60s gospel record, is the basis for thousands of hip-hop tracks, making it one of the most sampled records ever that's informally known as 'the Amen break.'