Allow me to suggest that today, October 3, should be a candidate for America’s worst day. Why? Because on this day in 1913, one of America’s worst Presidents, Woodrow Wilson, signed into law the Revenue Act of 1913, which imposed the income tax. The worst thing about that law is not the tax rates, the double taxation, or the complexity. The worst thing is that the income tax enabled the modern welfare state.
Before the income tax, politicians had no way to finance big government. Their only significant pre-1913 sources of revenue were tariffs and excise taxes, and they couldn’t raise those tax rates too high. Once the income tax was adopted, though, it became a lot easier to finance subsidies, handouts, and redistribution.
And as government becomes bigger and bigger, diverting more and more resources from the productive sector of the economy, we can expect more stagnation and misery. That’s why October 3 is an awful day in American history.
It’s hard to know what is the worst thing about the income tax but I reckon that it punishes people who work and invest. That could never be good policy! Government funds raised by the income tax have mostly been used to establish the welfare state but it would have been as bad to squander the funds on foreign military adventures. Welfare and warfare are evil twins. Welfare is a civil war between industrious people and parasitic people.