We went from tariffs being the major source of federal government revenue to what we have today under the income tax and payroll taxes. The time scope is from 1789 to the Great Depression. In 1790, 99.9% of federal government revenue is generated by tariffs – the first year we operate under the Constitution. In 1860, still 94% of total fed government revenue is generated by tariffs. Only the War Between the States changes this and we get our first federal income tax.
Presented as part of the Mises Institute's Brown Bag Seminar series on May 19, 2005 in Auburn, Alabama.
The handouts from this lecture are available above.