Given that one of the causes of the American Revolution was an unjust tax, the Founders understood very well that taxation could become a way for one group to prey on another. So while the Constitution empowered the federal government to levy taxes, it limited this power mostly to indirect taxes such as tariffs, duties, and excise taxes. For much of American history, the federal government subsisted solely on those fees.
Until the Civil War, the idea of a tax on individual incomes would have seemed preposterous to most Americans. Only as an emergency wartime measure did Congress adopt an income tax in the 1860s, and the measure was allowed to lapse with little fanfare in 1872.
The modern income tax begins with the Progressive era in American politics. In an influential 1889 article titled "The Owners of the United States," crusading attorney Thomas Shearman argued that the lion's share of the country's wealth was in a limited number of hands. If an income tax were not adopted, he warned, within 30 years "the United States of America will be substantially owned" by fewer than 50,000 people.
This marked the beginning of a never-ending campaign. Many activists since have characterized America as a permanent plutocracy. And their prescription has generally been more and higher taxes.
Shearman's advocacy of an income tax found a receptive audience in populist politician William Jennings Bryan. Exploiting the dire conditions created by the depression of 1893, Bryan promoted the adoption of an income tax.
His proposal succeeded when Congress passed a 2 percent flat tax on incomes over $4,000 in 1894. The following year, however, the Supreme Court held the tax to be unconstitutional.