Income tax

Income tax, the major source of government revenue. As opposed to excise taxes levied on goods, it is a tax on the incomes of individuals, proportionate to their incomes, or on corporations. At first imposed only to meet extraordinary expenditures such as war financing, income tax became permanent in Britain in 1874. In the United States it was levied during the Civil War, but an attempt to make it a permanent federal tax was ruled unconstitutional. The 16th Amendment (1913) authorized the federal government to levy the tax, and since 1919 most states have also adopted this mode of revenue raising. It is assessed on net income after allowances have been deducted for family dependents, contributions to charities, and certain other expenditures. Incomes below a certain level are entirely tax exempt; above this level the rate rises progressively to about one-third of a person's earnings.

See also: Internal Revenue Service; Taxation.