NEW YORK (TheStreet) -- Did you forget to say happy birthday to income taxes? Feb. 3 was the 100th anniversary of the ratification of the 16th Amendment — the one saying "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration."
Congress passed the Revenue Act of 1913 on Oct. 3 of that year, which created the first permanent federal income tax.
Congress had made two previous attempts at instituting a federal income tax. The first, in 1861, was an emergency measure to fund the Civil War and was repealed in 1872. In 1894, in response to complaints that excessive reliance on tariffs as a source of revenue caused the price of imported goods to rise, Congress again passed an income tax law, which the Supreme Court ruled unconstitutional in 1895.
Some facts about the 1913 Form 1040:
- The tax applied to salaries and wages, interest, dividends, rents, royalties, pensions and annuities, income from estates, trusts, sole proprietorships and partnerships and gains from the sale of most types of property.
- The salaries and wages of state and local government employees were exempt from income tax.
- Interest from federal, as well as state and local, government bonds was exempt from income tax.
- Deductions were allowed for “personal” interest, federal excise taxes, taxes paid to state and local governments, casualty and theft losses, bad debts, business expenses and depreciation of property used in business.
- There was an exemption of $3,000 for single people and $4,000 for married couples.
- A "normal" tax of 1% was applied to the first $20,000 of taxable income. Dividends were exempt from this "normal" tax. An additional "super" tax was applied to income, including dividends, in excess of $20,000. It started with 1% on net income over $20,000 and not exceeding $50,000 and rose to only 6% on net income over $500,000.
- The return was due “on or before the first day of March.”
- There was only one page of instructions!