From my op‐ed in the Daily Caller today:
Alexander Hamilton won in the end. As Treasury Secretary in the 1790s he championed an array of “internal” taxes to supplement federal revenues from import tariffs. Thomas Jefferson despised Hamilton’s internal taxes as an assault on liberty, and when elected in 1800 he made sure that they were abolished.
The Jeffersonian view held sway for decades, but by the late 19th century the growth in government and concerns about high tariffs led to calls for new revenue sources. The first income tax was imposed to fund the Civil War and lasted until 1872. Another income tax was imposed in 1894, but it was struck down by the Supreme Court as unconstitutional.
At the turn of the 20th century, the rise of Progressivism and the Democratic opposition to high tariffs generated support for an income tax. President William Howard Taft proposed a Constitutional amendment for an income tax in 1909. It was passed by the House and Senate, and then ratified by the states in early 1913. Congress got to work on legislation, and the modern income tax was signed into law by President Woodrow Wilson exactly 100 years ago today, October 3, 1913.
Thomas Jefferson noted of internal taxes that they “covered our land with officers and opened our doors to their intrusions.” That’s certainly true of the income tax. Indeed, Jefferson would be horrified by the power of today’s IRS to break down our doors and seize our property, and he surely would have led a revolt on seeing the powers added to the IRS under Obamacare.
The Jeffersonian goal of abolishing internal taxes seems distant, but we can make the federal tax system much simpler, more efficient, and respectful of limited government. After a century, it’s time to scrap the income tax and replace it with a consumption‐based flat tax.