Congress passed the 16th Amendment on July 2, 1909, and states ratified it February 3, 1913, when Delaware became the 36th state to approve. The amendment reversed Supreme Court decisions blocking income taxes, giving Congress power to tax incomes without apportioning by state population.
The Revenue Act of 1913 quickly followed, imposing a one percent tax on incomes above $3,000 yearly—affecting just three percent of Americans—with a top rate of six percent on incomes over $500,000. The federal government collected $71 million in income taxes in 1913. Less than one percent of the population paid that first year due to generous exemptions and deductions.
Before 1913, customs duties and excise taxes funded the federal government. By 2024, income taxes dominate federal revenue: individual income taxes generated $4.9 trillion, with almost half of total federal revenue coming from individual income tax receipts. Individual income taxes hit 8.4 percent of GDP in 2024, close to the 50-year average of 8.0 percent.