Yesterday was the 100th anniversary of the passage of the 16th
Amendment, which authorized the income tax. I frequently show
students the following chart, generated by the Federal Reserve
Bank of St. Louis, and ask the simple question: “See if you can
spot when the personal income tax started?” Meanwhile, John
Steele Gordon has a nice retrospective on the history of the
income tax over at American.com, including this most relevant
bit: Once the Sixteenth Amendment was ratified, of course,
Congress (with strong Democratic majorities in both houses)
quickly passed a personal income tax, aimed at the upper middle
class and above, with a top rate of 7 percent on incomes over
$500,000. Unfortunately, the personal income tax did not replace
the corporate income tax that had originally been intended only
as a stopgap. Nor did Congress integrate the two taxes so that
income, whether corporate or personal, was only taxed once. The
two taxes simply ignore each other as if corporations are owned
by Martians, not people.