From Abe Lincoln To Donald Duck: History Of The Income Tax : Planet Money The story of how the U.S. wound up with the income tax is the story of two wars, a Supreme Court justice on his death bed, and Donald Duck.
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From Abe Lincoln To Donald Duck: History Of The Income Tax

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From Abe Lincoln To Donald Duck: History Of The Income Tax

From Abe Lincoln To Donald Duck: History Of The Income Tax

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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Get ready, because tax day is fast approaching. It seems like the appropriate time to note that the income tax is the major source of revenue for the U.S. government. But that was not always the case. In fact, the story of how we got the income tax is the story of several wars, a Supreme Court justice on his death bed and a duck.

David Kestenbaum with our Planet Money team has a brief history.

DAVID KESTENBAUM, BYLINE: Before you can have an income tax, you have to overcome three basic obstacles. The first, logistics. Like, how do you make sure people pay? In the early days, the government got most of its revenue a simpler way. Taxing stuff that came into the ports. Though, that had its limits.

JOE THORNDIKE: Tariff duties are a great way to raise money as long as you're not fighting a war.

KESTENBAUM: Yeah, because someone's blocking your port, right?

THORNDIKE: Or sinking your ships on the way across the ocean.

KESTENBAUM: That's Joe Thorndike, who co-authored a book called "War and Taxes." During the Civil War, he says, Congress decided it had to try an income tax. And the government does this really very clever thing to get people to pay it. It makes tax returns public.

THORNDIKE: During the Civil War, anyone could go in and look up your income tax return or at least your report of how much you earned. And the idea was that this would help improve compliance, because your neighbor would see you driving around on your brand new plow and he'd say wait a minute. That guy, how did he get all that money? I'm going to see how much he reported on his income tax.

KESTENBAUM: A tax assessors list from 1864 shows a Mr. Abraham Lincoln, address: White House, taxes paid: $1,296. Also entries for restaurant owners and liquor dealers. The income tax - people paid it.

The income tax faced a second obstacle though, a legal obstacle. The income tax at this point taxed mainly the rich. The rich didn't like it and the rich, have lawyers. In 1895, the case reaches the U.S. Supreme Court.

JOHN STEELE GORDON: My great, great uncle was one of the lead lawyers in that case. And guess which side he was on?

KESTENBAUM: Trying to shoot down income tax.

GORDON: You got it. He was a Morgan partner five years later.


KESTENBAUM: This is economic historian John Steele Gordon. The argument his great, great uncle made in court was that the income tax violated the U.S. Constitution, which said any direct tax had to be divvied up among the states according to their populations. And the income tax wasn't taxing according to population, it was taxing according to income.

GORDON: A very interesting thing happened in the Supreme Court. One justice was ill - in fact, he was dying, Justice Jackson from Tennessee. It was argued before eight justices, split four-four.

KESTENBAUM: That's why we have an odd number of justices, so you can't have a tie.

GORDON: Exactly.

KESTENBAUM: The court decides to haul Justice Jackson out of his death bed and rehear the case. Jackson is a supporter of the income tax. So, he is going to break the tie in favor of the income tax. And the tie is broken, but it's five-four the other way, against. Income tax is ruled unconstitutional.

GORDON: One of the other justices, we don't know who because the opinion was unsigned, switched his vote.


GORDON: And so, the tax was unconstitutional, no income tax.

KESTENBAUM: The legal problem is finally overcome in 1913 with a constitutional amendment. So, logistics, check. Legality, check. The income tax needs one more thing - love.

The income tax up to this point has been a tax on the rich. Everyone else was exempt. This changes with World War II. The government needs money and now ordinary folks are asked to pay.

THORNDIKE: There was a lot of concern that Americans just wouldn't do it.

KESTENBAUM: Again, Joseph Thorndike.

THORNDIKE: That they wouldn't understand that they were supposed to, or that they had to, or even just how to do it.

KESTENBAUM: The government needs to get the word out. It needs a spokesperson for the income tax. Someone with credibility, someone who's instantly recognizable, someone who's easy to understand.


KESTENBAUM: Donald Duck.


KESTENBAUM: This film is from 1943. In it, Donald Duck is marching around his house patriotically listening to the radio and talking back to it.


UNIDENTIFIED MAN #1: Are you a patriotic American?

CLARENCE NASH: (as Donald Duck) Yes, sir.

UNIDENTIFIED MAN #1: Eager to do your part?

NASH: (as Donald Duck) Yes, sir.

KESTENBAUM: Donald Duck runs and gets a gun and a sword and boxing gloves.


UNIDENTIFIED MAN #1: Then there's something important you can do.

NASH: (as Donald Duck) Oh, boy. Oh, boy. Oh, boy.

UNIDENTIFIED MAN #1: Your income tax.

NASH: (as Donald Duck) Income tax?

UNIDENTIFIED MAN #1: Yes, your income tax.

NASH: (as Donald Duck) (Unintelligible) income tax.

KESTENBAUM: The film walks Donald Duck through filling out his tax form. Occupation, he writes actor. Dependents: Three - Huey, Duey and Louie.

And this wartime patriotic motivation campaign, it worked. Maybe we didn't love the income tax. But we paid it. And it's still around today.

David Kestenbaum, NPR News.



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