BDO Centennial Moment – The Constitutional Amendment That Paved the Way for Seidman & Seidman's Tax Focus
President Woodrow Wilson (left) and Oscar W. Underwood (right)If not for the passage of the 16th constitutional amendment, BDO would be a far different firm today. That’s the amendment that allowed individual income tax to be levied for the first time.
It all came about through the serendipitous juxtaposition of President Woodrow Wilson, Oscar W. Underwood and the Revenue Act of 1913.
In 1913, President Wilson had a growing concern that tariff rates were far too high and summoned a special session of Congress in April of that year to address the issue.
Representative Oscar W. Underwood of Alabama, who stood strong against opponents' attempts to increase tariff rates, guided the reform through the House, but his Senate counterpart, F.M. Simmons of North Carolina, stood in the way of passage. Wilson took the offensive, eventually generating public support for the measure.
In the end Wilson and Underwood were victorious – the Revenue Act of 1913 passed the House, 281 to 139, in May 1913, followed by Senate passage, 44 to 37, in September 1913. The Revenue Act lowered basic tariff rates from 40 percent to 25 percent.
This decrease in tariff rates forced the government to find another source to replace what had been its main income.
The solution: the 16th Amendment to the Constitution, which allowed individual income tax to be levied for the first time in conjunction with the Revenue Act of 1913.
In the first year, fewer than 1 percent of the population paid federal income tax.
