The Evolution of the Federal Tax System

Roy Blough
1940 Law & Contemporary Problems  
The evolution of the federal tax system has been from small volume of revenues to large volume, from a simple structure to a highly complicated and diverse structure, from almost complete reliance on indirect taxes to heavy reliance on progressive direct taxes. Over the three-fourths of a -century of national life prior to the Civil War the tariff on imports was the overwhelmingly important source of federal tax revenue and during two-thirds of that period no other taxes were in effect. Basic
more » ... in effect. Basic developments in the federal tax system have come for the most part in three major waves which occurred during and after the Civil War, the World War and the recent depression. Each wave was characterized by a great extension and multiplication of revenue sources, followed (at least in the first and second waves) by a contraction and abandonment of sources, with a net long-term result of expansion and diversification of the system. The Civil War period added to the tariff, internal revenue taxes on liquor and tobacco as permanent revenue sources. The World War period enlarged the income tax, which had just been introduced, from a minor position to that of the major source of federal revenue, and added the estate tax. The outcome of the latest major tax wave, that of the recent depression period, is still uncertain, but there is little doubt that the permanent effects on the tax system will be of major characterO 0 PhD., 1929, various articles and works in the field of taxation. 'Other waves of taxes which left no apparent permanent changes in the tax structure occurred during the first decade of national life, the War of s8xa, and the Spanish-J.-Merican War, respectively. The first Act of Congress in 1739 imposed a tariff for revenue and protection. The revenue as insudent, and during the neit few years taxes were imposed on the manufacture of whiskey, snuff and suga, legal documents and carriages, and in 1798 a single payment direct tax levy was itspo-ed on houses, slaves and lands. Collections from the various internal levies and the direct tax were relatively small, exceeding !5% 'of the collections from the tariff in only one year. All internal taxes were repealed in S8o2 or shortly thereafter. Opposition to internal taxation continued to be so strong that despite the requirements of the War of 1S2, no new taxation was provided until the summer of 1813 when taxes were imposed on liquo^s sugar refining, carriages, auctions and financial instruments, and a broad list of manufacures' Sales, and a single payment direct tax imposed on houses, slaves and land. Tax rates were increased in 1814 and in 1815 the internal revenue, incauding the direct tax, nearly equalled the reduced customs receipts of that year. Following a very high customs yield in the next year, after the end of the war, the war taxes wer practically all repealed. From s8S7 until the Civil War the tariff was practically the sole source of tax revenue, adjustments being made in the rater from time to time to meet the demands for revenue and protection. Revenues
doi:10.2307/1189611 fatcat:qu72qdcdpjesfnk6jx36ugz6qm