When Woodrow Wilson signed into law the Revenue Act of 1913, it probably sounded like a good idea.
Most people would pay less in taxes and the prices of everyday goods would drop, he promised. And the rich would — finally! — start paying their fair share.
In those days, tax collection was a highly diffuse business with various states and localities collecting taxes at various rates. The federal government mostly skidded by on exorbitant and uneven tariffs, and on booze and tobacco taxes.
This was always tough and disorganized business for the federal government. Those hardships became especially acute for the federal government when it wanted to launch wars thousands of miles away on other continents.
And, anyway, who could question the motives of Woodrow Wilson?
He was a celebrated professor with a sterling Ivy League background who ran for president on the promise to govern sensibly and never go to war. He maintained a grand worldview and would later be awarded the Nobel Peace prize in the category of “world organizing” on his gallant promises to establish lasting peace to end World War I, which would become mankind’s last war.
What could possibly go wrong?
If Vice President Joseph R. Biden had been alive back then, he could have described Wilson as “articulate and bright and clean and a nice-looking guy. I mean, that’s a storybook, man!”
At first, Wilson’s internal revenuers tiptoed into people’s wallets, taxing their hard work at rates that today seem laughable. The top marginal income tax rate was set at 7 percent.
When one of America’s first tax cheats — none other than Woodrow Wilson himself — got busted for mistakes on his tax forms, it was dismissed as “of course, an oversight.”
In a 1918 letter to his collector of internal revenue Joshua W. Miles, Wilson requested, “Will you not do a busy man the favor of regarding this letter as an authorization to correct the mistake and to have a computation refigured accordingly?”
Not exactly the pleasant fellows working over at the IRS today.
Soon, the marginal tax rates began rising. By 1919, federal revenuers were deputized to enforce the 18th Amendment’s ban on the manufacture, sale or transport of intoxicating beverages.
And they have not left us alone ever since.