<P> The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration . </P> <P> The Supreme Court in Brushaber v. Union Pacific Railroad, 240 U.S. 1 (1916), indicated that the Sixteenth Amendment did not expand the federal government's existing power to tax income (meaning profit or gain from any source) but rather removed the possibility of classifying an income tax as a direct tax on the basis of the source of the income . The Amendment removed the need for the income tax on interest, dividends and rents to be apportioned among the states on the basis of population . Income taxes are required, however, to abide by the law of geographical uniformity . </P> <P> Congress enacted an income tax in October 1913 as part of the Revenue Act of 1913, levying a 1% tax on net personal incomes above $3,000, with a 6% surtax on incomes above $500,000 . By 1918, the top rate of the income tax was increased to 77% (on income over $1,000,000, equivalent of 15,300,000 in 2012 dollars) to finance World War I . The average rate for the rich however, was only 15% . The top marginal tax rate was reduced to 58% in 1922, to 25% in 1925 and finally to 24% in 1929 . In 1932 the top marginal tax rate was increased to 63% during the Great Depression and steadily increased, reaching 94% (on all income over $200,000, equivalent of 2,500,000 in 2012 dollars) in 1945 . During World War II, Congress introduced payroll withholding and quarterly tax payments . </P> <P> Following World War II tax increases, top marginal individual tax rates stayed near or above 90%, and the effective tax rate at 70% for the highest incomes (few paid the top rate), until 1964 when the top marginal tax rate was lowered to 70% . Kennedy explicitly called for a top rate of 65 percent, but added that it should be set at 70 percent if certain deductions weren't phased out at the top of the income scale . The top marginal tax rate was lowered to 50% in 1982 and eventually to 28% in 1988 . It slowly increased to 39.6% in 2000, then was reduced to 35% for the period 2003 through 2012 . Corporate tax rates were lowered from 48% to 46% in 1981 (PL 97 - 34), then to 34% in 1986 (PL 99 - 514), and increased to 35% in 1993 . </P>

When did we start paying federal income tax