In 1913, Congress gave us the income tax. It only applied to the wealthiest Americans, the top 4%, but that included the famous silent film stars who were earning millions of dollars at a time when a dollar was worth about $25 of today’s money. There was no such thing as withholding, so you paid your taxes all at once with a big check. The story goes that when Mary Pickford, Hollywood’s wealthiest actress, handed over her check, the size of it “startled the cashier.” The New York Times reported that her check was in the six figures. Mary claimed that she was “very brave and smiled” as she handed it over. Ouch.
The income tax was a concept supported by those who favored prohibition. Until this point, the majority of government revenue had come from liquor tax revenue and customs duties (taxes on imports). Supporters of prohibition knew that there could never be a national law or amendment banning alcohol unless there was some alternative way for government to raise revenue, so they supported the income tax. So one of the most important features of the Roaring Twenties–prohibition–can thank the income tax for its existence.
So today, we have no more prohibition, but somehow, the income tax never went away . . .
By the way, Ken Burns latest documentary is on this week, all about Prohibition and the Roaring Twenties!