Correction (Dec. 20, 2016): This fact-check initially published on Aug. 24, 2015, and was rated Mostly True. Upon reconsideration, we are changing our ruling to Half True. The text of the fact-check is unchanged.
Democratic presidential candidate Jim Webb says the U.S. needs a leaner, more efficient tax code.
The former Virginia senator broadly calls for lowering tax rates in exchange for eliminating "loopholes and exceptions" that he says "have made a mockery out of true economic fairness." Webb says investment income should be taxed at the same rates as wages. And he would like to see the U.S. shift some of its burden away from income and toward consumption.
Big changes? Sure. But Webb says the tax code is not sacrosanct.
"We did not even have a federal income tax in this country until 1913," he wrote on his campaign website.
Our radar beeped. Somewhere in the course of our lives, we recalled reading or hearing that the income tax had deeper roots in U.S. history than Webb claimed. So we investigated.
In 1913, the year Webb cites, the U.S. began a tax on individual incomes, and a levy on personal earnings has been exacted ever since. That was the birth year of the 1040 tax form that, with many modifications, remains in use today. It came with one page of instructions back then, compared with 104 pages this year.
Although the form was new, oldtimers in 1913 might have remembered another era when they paid income tax to Washington.
In 1862, President Abraham Lincoln signed a measure enacting an income tax to help pay for the Civil War. It imposed a tax of 3 percent on incomes between $600 and $10,000 and a 5 percent tax on incomes above that level. The levy, which had sunset provisions, expired in 1872. It was not forgotten, however.
In 1894, Congress passed a new income tax, but it never went into effect. The U.S. Supreme Court ruled it unconstitutional the next year because it was a direct tax that was not apportioned on the basis of each state’s population. At that time, for example, if 5 percent of the U.S. population lived in Virginia, then no more than 5 percent of the total revenue could come from Virginia.
That constitutional hurdle was cleared by the 16th Amendment, proposed by President William Howard Taft in 1909 and ratified by the states in 1913. It allowed the tax to be levied without any apportionment among states. Congress adopted a 1 percent tax on net personal income of more than $3,000 with a surtax of 6 percent on incomes of more than $500,000.
By 1918, with World War I raging, the top income bracket soared to a 77 percent tax rate.
We ran Webb’s statement past Joseph Thorndike, the director of the online Tax History Museum -- a nonprofit organization based in Falls Church. Thorndike, also an adjunct professor of tax policy at Northwestern University, said Webb’s historical oversight merits a minor penalty. "I think it’s fair to treat the Civil War tax as an anomaly," he said.
Wonder where the U.S. got its revenues prior to the income tax?
Before the Civil War, government funds primarily came from custom duties, selling public land and temporary excise taxes, according to the Congressional Research Service report. During the decades after the Civil War, when the income tax lapsed, the IRS says about 90 percent of the country’s revenues came from taxes on liquor, beer, wine and tobacco.
Webb said "we did not even have a federal income tax in this country until 1913."
The modern income tax structure, complete with Form 1040, was born in 1913. But his claim disregards two pre-1913 efforts to impose an income tax — one of which was in place for a decade. This claim rates Half True.