Question

Describe how tarrifs were used to fund the United States Government prior to the imposition of the permanent income tax in the early 1900’s

2-3 pages

Fives references

Answer 1

The U.S. government was capable of paying for its expenses without an income tax prior to 1913 largely because it had fewer responsibilities. Thomas Eddlem noted in The New American, that the federal government’s responsibilities were limited to basic operational matters and did not include such modern expenses as social insurance programs, welfare programs or agricultural subsidies.

The early Americans accumulated a lot of debt associated with the Revolution. The federal government assumed the debt of the colonies and sought to pay it off by taxing imports and imposing excise taxes on products such as alcohol, tobacco and refined sugar. Congress passed an excise tax on all distilled spirits in 1791, causing an uprising among farmer/distillers in the western part of Pennsylvania. The Whiskey Rebellion ended with President George Washington mobilizing 13,000 militiamen from multiple states and arresting 150 rebellious farmers. Only two were convicted of treason and they were later pardoned.

Article I, Section 9 of the U.S. Constitution states, "No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken." A federal income tax had been enacted in 1861, but was struck down as unconstitutional by the Supreme Court in 1895 as it was found to be a direct tax outside the constitutional constraints. Congress removed these limits in 1913 with the passage of the 16th Amendment, which allows it to impose income taxes specifically, "without regard to any census or enumeration."