The US officially adopted an income tax in 1913

On July 1, 1862, the agency now known as the Internal Revenue Service was established and named the Bureau of Internal Revenue

It was created to collect the first-ever US income tax, which was created to help pay for the Civil War. After gaining their independence from Britain, Americans were skeptical about giving the federal government absolute power to collect federal income taxes. As a result, early US tax laws dictated that direct taxes, like income taxes, had to be directly apportioned to a state's population. The nation went back and forth on its federal tax laws multiple times. For instance, in 1872, the income tax from the Civil War was repealed. But it was revived in 1894, and then repealed again in 1895. In 1913, Congress passed the 16th Amendment, giving Congress the power to levy income taxes on individuals and corporations without apportioning the burden among the states in line with population, once and for all.

How income taxes evolved from a funding tool for war into a crucial revenue source for the federal government

Americans have long resisted income taxes. So, how did they become permanent? This overview explains how wartime funding needs, constitutional changes, and economic shifts gave rise to the modern tax system, from the Civil War to the payroll withholding rules we follow today.

The 16th Amendment paved the way for capital gains taxes

Ratified in 1913, the 16th Amendment paved the way for a far-reaching federal income tax and supercharged the country’s coffers. Before then, the US depended on import tariffs and so-called consumption taxes to raise revenue.

Capital gains taxes were first levied in the US in 1913

However, up until 1921, they were treated the same as ordinary income. Ever since then, rates have swung up and down.

Since 1913, Americans have paid income taxes at varying rates

In the 2020s, the top marginal tax rate has floated around 37%, relatively lower than previous eras. Some have called for boosting the rate significantly to tax the highest earners.

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.

Individual income taxes are the federal government's primary revenue source, see a tracker that breaks down where the rest of the budget comes from

The US government historically makes nearly half of its total revenue last year from individual income taxes. But the US makes also makes money from a variety of other sources, including Medicare taxes and corporate income taxes. However, the federal government has run a deficit since 2001—reaching a peak of $3.13T in 2020.

Read why some states are considering imposing a flat tax rate that isn't adjusted by income

Wisconsin was the first US state to impose a state income tax, close in time to when the federal income tax went into effect. Many states followed suit, but nine states to this day still don't levy wage-related taxes.

Death taxes have helped fund wars since the 1860s

Death taxes date back to 700 BCE and were used in Ancient Rome and Ancient Egypt. In the US, they've been used to finance wars since the Civil War, and have been levied on both the estate and beneficiary. The estate tax created during WWI to help finance war efforts is still in effect today.

How the federal income tax affected Prohibition

In the early 1900s, 30% to 40% of government tax revenue came from liquor, wine, and beer, a reliance that made Prohibition seem like a fiscal impossibility. But the passage of the federal income tax in 1913 changed the calculus, which helped allow the government to ban alcohol production and sales.

Learn how the US tax code works and why it's important

First published in 1926, the US Code is the official codification of federal statutes in the US. Title 26 of the US Code, for instance, lists all of the federal tax laws of the United States. A new edition is published every six years.

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.

Why the rich don't pay taxes like you do

The system behind the US income tax isn't as straightforward as it looks. You earn money. Taxes get taken out. Case closed … right? Not exactly. In this episode of "1440 Explores," we break down how the US tax system actually works, from confusing deductions and misunderstood tax brackets to why the wealthiest Americans often end up paying a very different tax than everyone else.

The highest inflation in US history was estimated at 30% in 1778

This was just after the Revolutionary War. Both World Wars also brought double-digit inflation. It's worth noting that exact inflation rates in early America are difficult to calculate precisely.

The Tariff Act of 1789 was one of America's first acts

One of the first acts ever passed by the United States Congress instituted tariffs on foreign goods. The bill was sponsored by then-Congressman James Madison and signed into law by President George Washington. The goods the first Congress felt necessary to tax included Jamaican rum, playing cards, and—of course—British tea.

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.

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.

Minimum wage laws are a relatively new phenomenon in the US

Today, the federal minimum wage in the US is $7.25 per hour. But the country wasn’t founded with minimum wage laws in its DNA. The first federal minimum wage wasn’t set until 1938, when it was 25 cents per hour.

The US has used a wide variety of different currencies between the 1690s and today

From colonial money to national banknotes, people have used all kinds of forms of currency throughout the history of the United States before settling on the dollar bills and quarters that we pay for things with today.

Roth IRAs were first introduced in the Taxpayer Relief Act of 1997

The Roth IRA is one of the most popular retirement accounts in the US. Nearly a quarter of Americans contributed to a Roth IRA in 2023. But this type of financial account hasn’t been around for that long.

The US framework of government has influenced the constitutions of many other countries

In 1787, the US Constitution introduced a system built on the separation of powers and individual liberties, including freedom of speech and religion. Though widely influential, its rigidity has made it less of a modern model as countries adopt more adaptable constitutional frameworks.

The first recorded worker strike in the United States happened in 1768

That year, journeymen tailors went on strike to protest a wage reduction. By 1794, cobblers in Philadelphia formed the nation’s first trade union, the Federal Society of Journeymen Cordwainers. But that’s just the beginning of labor union history in the US.

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.

Native Americans were not granted US citizenship until 1924

The Indian Citizenship Act granted citizenship to all Native Americans born in the US, more than 130 years after the Constitution's ratification. Even then, some states continued to deny Native Americans the right to vote for decades.

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

How the US entered WWI in 1917

Originally taking a position of neutrality during the course of World War I, the United States of America eventually relented. Entering the war in 1917, support for the British and French had risen and Americans were incensed by Germany's overtures to Mexico and U-boat attacks that sank ships and ended American lives. See how and why the US entered WWI in this article.

While the first exchange-traded fund (a 'basket' of different assets that can be bought and sold on a stock exchange) in the US only launched in 1993, the global ETF market has grown to more than $10T in the short time since.

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

Trace how the Bill of Rights, inspired by centuries of political theory, took shape between 1774 and 1789.

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

The United States is one of only around two dozen countries with a fully federal system of government, in which power is divided between national and state governments.

The US dollar is the most widely circulated currency in the world, and is involved in nearly 90% of global transactions

The American Society of Civil Engineers' infrastructure report card gave the US a C in 2025, its highest grade since the project launched in 1998.

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

Despite being favored by 87% of Americans, Congress does not have term limits.

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

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.

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.

See a ranking of the best (and worst) Federal Reserve Chairs since 1914 out of the 16 men and women who have held the office since.

View the ten deadliest tornadoes in US history.

The word 'jazz' evolved from 'jasm,' 19th-century American slang for 'energy'

A century of Billboard issues documenting the evolution of popular music.

The American cockroach is actually from Africa, an apparent hitchhiker aboard ships carrying enslaved people, with evidence suggesting the bug may have arrived in the New World as early as the 1600s.

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

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.

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

The concept of phantom limbs, the perception that amputated limbs are still present, dates back to a French military surgeon in the 16th century.

Some coin denominations have ridges etched on their sides, partly to prevent counterfeiting, in a practice called 'reeding.'

English mathematician Ada Lovelace wrote the first computer algorithm a century before computers existed and hypothesized that computing devices would one day be able to compose music—foreseeing the generative AI systems of today.

Poison ivy can cause rashes year-round since all parts of the plant contain urushiol, the oil that triggers our allergic response.