Amendment XVI

"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. " - The sixteenth Amendment to the U.S. Constitution - Ratified 1913.

Congress passed a new income tax law with rates ranging between 1 - 7% for taxpayers with income in excess of $500,000 in 1913. At the time, this meant less than 1% of the population actually paid income tax. Form 1040 was introduced and although changed over the years, is still in use today.

Prior to the enactment of the income tax, most citizens were able to pursue their endevors without the direct knowledge of the government. Wages and profits were earned with little or no government involvement. In 1916, after the passage of the income tax, congress realized the invasiveness of the income tax and pass the requirement that tax returns be kept confidential.

Prior to the income tax, the government relied on excise taxes and and tariffs for its funding.