Legal history of income tax in the United States adopted an income tax modeled on the tax instituted in England. The British theory was that you tax the income from property, and not the property itself; thus, sales of property were not subject to taxation. In order to help pay for its war effort in the American Civil War, the United States government imposed its first personal income tax, on August 5, 1861, as part of the Revenue Act of 1861. Tax rates were 3% on income exceeding $600 and less than $10,000, and 5% on income exceeding $10,000. This tax was repealed and replaced by another income tax
Legal history of income tax in the United States (1916), the 1913 Act was ruled to be constitutional. A separate excise tax was also imposed on corporations. Subsequent legal actions were concerned with what should be counted as "income" under the 1913 Act. In "Eisner v. Macomber" (1920), the Supreme Court ruled that proportionate stock dividends were not taxable as income, on the grounds that the dividend income was not "severable" from the capital holding from which it was derived. Later decisions, however, have tended to limit this view of "severability," and to uphold the federal statutes as exertions of the power of Congress to tax. The first attempt