By Larry Clinton, Sausalito Historical Society
The personal income tax became a permanent part of American life when the 16th Amendment was ratified in 1913. (During the Civil War Congress had passed the Revenue Act of 1861 which included a tax on personal incomes to help pay war expenses. That tax was repealed ten years later.)
By 1921, at the dawn of the Roaring Twenties, the IRS was in full force, as noted by the Sausalito News:
Work has begun on the collection of the income tax for the year 1920. Uncle Sam (through the Bureau of Internal Revenue) is addressing to every person in the United States the question "What was your net Income for 1920?" The answer permits of no guesswork. Every single person whose net income for 1920 was $1000 or more and every married person whose net income was $2000 or more is required to file a return under oath with the collector of internal revenue for the district in which he lives on or before March 15, 1921.
PHOTO COURTESY OF SAUSALITO HISTORICAL SOCIETY
With two competing ferry systems during the 20s, traffic jams were routine here
The penalty for failure is a fine of not more than $1000 and an additional assessment of 25 per cent of the amount of tax due. For willful refusal to make a return the penalty is a fine of not more than $10,000 or not exceeding one year's Imprisonment, or both together with the costs of prosecution. A similar penalty is provided for making a false or fraudulent return, together with an additional assessment of 50 per cent of the amount of tax evaded.
The Income tax applies to women as well as men. Husband and wife must consider the income of both plus that of minor dependent children, and if the total equals or exceeds $2000 a return must be filed. A minor who has a net income in his own right of $1000 or more must file a separate return. To be allowed the $2000 exemption a married person must be living with husband and wife on the last day of the taxable year, December 31, 1920. Divorcees, persons separated by mutual agreement, widows and widowers, unless they are the sole support of others living in the same household, in which case they are allowed the $2000 exemption granted the head of a family, are entitled only to $1000 exemption. The normal tax rate for 1920 the same as for 1919 — 4 per cent on the first $4000 of net income above the exemption and 8 per cent on the remaining net income. This applies to every citizen and resident of the United States. In addition to the normal tax a surtax is imposed upon net incomes in excess of $5000.
Full instructions for making out returns are contained on the forms, copies of which may be obtained from collectors of internal revenue. Persons whose net income for 1920 was $5000 or less should use Form 1040 A. Those whose incomes was in excess of $5000 should use Form IO4O. Revenue officers will visit every county in the United States to assist taxpayers in making out their returns and the date of their arrival and the location of their offices will be announced by the press or may be ascertained upon inquiry at the offices of collectors. This advisory service is without cost to taxpayers.
According to irs.gov, average income in 1920 was $3,269.40, the average amount of tax $148.08 and the average tax rate 4.53 per cent.
As Ben Franklin wrote 1789, “in in this world nothing can be said to be certain, except death and taxes.” Judging by the accompanying photo, by the 20s another certainty was traffic jams in Sausalito.