How Income Taxation Built the Middle Class
Across the U.S., new progressive state legislative majorities endorsed the income tax amendment in 1910 and 1912. Early in 1913, final ratification gave Congress a green light to add an income tax to the tax code. Eight months later Congress passed a new revenue act that featured a modest income tax of up to 7 percent on income higher than $4,000, the equivalent of $94,000 today.
John Buenker and Sam Pizzigati explain that during the mid-20th century, a progressive income tax with steeply graduated tax rates raised the revenue that payed for the new programs and services that opened doors into middle-class life. These steeply graduated rates sent the message that American society frowned on incomes that towered too high. As a result of the progressive income tax, the U.S. became the first mass middle-class nation in the history of the world where the majority did not live in poverty. In contrast, tax reductions in recent decades have defunded infrastructure maintenance and development as well as job training and education; eroded middle class incomes and Americans' quality of life, and increased poverty in the U.S.
Read John Buenker and Sam Pizzigati's article: IRS at 100: How income taxation built the middle class