Pollock v. Farmers' Loan & Trust Co
In 1894 Congress created a personal income tax as a part of theWilson–Gorman Tariff Act. President Grover Cleveland was unhappy with the bill but let it pass without his signature. All income over $4,000 was subject to a 2% tax. It was the first peacetime federal income tax in the United States. It was challenged right away on the grounds that the Constitution required direct taxes to be levied in proportion to each state's population (called apportionment). The US government has levied taxes before but these were indirect taxes (such as on whiskey, carriages and other goods).