Changes

==Post Civil War==

==Post Civil War==

After the Civil War, the growing industrial and financial markets of the eastern United States generally prospered. But the farmers of the south and west suffered from low prices for their farm products, while they were forced to pay high prices for manufactured goods. Throughout the 1860s, 1870s, and 1880s, farmers formed such political organizations as the Grange, the Greenback Party, the National Farmers’ Alliance, and the People’s (Populist) Party. All of these groups advocated many reforms (see the Interstate Commerce Act) considered radical for the times, including a graduated income tax.  

After the Civil War, the growing industrial and financial markets of the eastern United States generally prospered. But the farmers of the south and west suffered from low prices for their farm products, while they were forced to pay high prices for manufactured goods. Throughout the 1860s, 1870s, and 1880s, farmers formed such political organizations as the Grange, the Greenback Party, the National Farmers’ Alliance, and the People's (Populist) Party. All of these groups advocated many reforms (see the Interstate Commerce Act) considered radical for the times, including a graduated income tax.  

==Progressive Era==

==Progressive Era==

In 1894, as part of the Wilson-Gorman tariff bill, Congress enacted a 2-percent tax on income over $4,000. The tax in 1895 was struck down by a five-to-four decision of the U.S. Supreme Court in ''Pollock v. Farmers' Loan & Trust Co.'' It held unconstitutional any direct tax by Congress on income.  A tax on income derived from property was a ''direct tax'' which Congress could impose only by the rule of apportionment according to population pursuant to Article I, Secs. 2 and 9 of the Constitution.  The ''Pollock'' decision was a surprise because merely 15 years earlier the Supreme Court had unanimously upheld a similar tax during the Civil War, the only other time that Congress had tried to tax income directly.

In 1894, as part of the Wilson-Gorman tariff bill, Congress enacted a 2-percent tax on income over $4,000. The tax in 1895 was struck down by a five-to-four decision of the U.S. Supreme Court in ''Pollock v. Farmers' Loan & Trust Co.'' It held unconstitutional any direct tax by Congress on income.  A tax on income derived from property was a ''direct tax'' which Congress could impose only by the rule of apportionment according to population pursuant to Article I, Secs. 2 and 9 of the Constitution.  The ''Pollock'' decision was a surprise because merely 15 years earlier the Supreme Court had unanimously upheld a similar tax during the Civil War, the only other time that Congress had tried to tax income directly.

Although radicals denounced the Court’s decision as a prime example of the alliance of government and business against the farmer, a general return of prosperity around the turn of the century softened the demand for reform. Democratic Party Platforms under the leadership of three-time Presidential candidate William Jennings Bryan, however, consistently included an income tax plank, and the progressive wing of the Republican Party also espoused the concept.

Although radicals denounced the Court's decision as a prime example of the alliance of government and business against the farmer, a general return of prosperity around the turn of the century softened the demand for reform. Democratic Party Platforms under the leadership of three-time Presidential candidate William Jennings Bryan, however, consistently included an income tax plank, and the progressive wing of the Republican Party also espoused the concept.

After ''Pollock'', the Court did uphold creative taxation by Congress based on a theory that they were levied on mere "incidents of ownership" and thus were constitutional excise taxes:  (1) an inheritance tax, (2) a tax affixing revenue stamps to memoranda for the sale of merchandise on commodity exchanges, (3) a war revenue tax upon tobacco being resold, and (4) a corporate income tax as an excise "measured by income" justified by the privilege of doing business in corporate form.

After ''Pollock'', the Court did uphold creative taxation by Congress based on a theory that they were levied on mere "incidents of ownership" and thus were constitutional excise taxes:  (1) an inheritance tax, (2) a tax affixing revenue stamps to memoranda for the sale of merchandise on commodity exchanges, (3) a war revenue tax upon tobacco being resold, and (4) a corporate income tax as an excise "measured by income" justified by the privilege of doing business in corporate form.