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US Internal Revenue Service Tax Office, 1950

Taxpayers trying to meet the State and Federal March 15, 1950 deadline crowd the United States Internal Revenue Service Tax Office. View the original source document: WHI 64507

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Discover how Wisconsin's income tax law became a model for the entire nation.

Three Centuries of Failure

Taxing income (as opposed to real estate, personal property or other tangible assets) was begun by the Puritans in Massachusetts in 1643. It didn't work. In fact, all 16 states that tried to tax incomes from 1643 to 1911 failed to raise significant amounts of revenue.

The principal reasons that income taxes didn't work were that most citizens deliberately lied about their incomes, elected officials were reluctant to antagonize voters by enforcing the law, and income was hard to verify compared to tangible property. Experts even said that taxing income was impossible.

Progressive-Era Tax Legislation in Wisconsin

Despite those challenges, Wisconsin officials went to work on income tax legislation. Their primary goal was not to raise additional revenue for the state but rather to distribute the tax burden more fairly. Farmers had been paying far more toward taxes, proportionally, than businesses or the wealthy, and legislators hoped to even the playing field.

In 1908 a statewide referendum overwhelmingly approved an amendment to the state constitution permitting the income of individuals and corporations to be taxed. Over the next two years, a Senate committee researched and drafted a bill, which came up for hearings in 1911.

This draft was critiqued so effectively by Delos O. Kinsman, who had just completed his doctoral dissertation on the issue at the University of Wisconsin, that he was hired to rewrite it. The revised version passed both houses and was signed into law in 1911. In the spring of 1912 Wisconsin residents paid their first income taxes.

A Model for the Nation

It was the first income tax legislation that actually worked and has been with us ever since. The keys to its success were that tax commissioners were appointed rather than elected, the tax rate was progessively scaled at rates most voters thought fair, the lion's share of the revenue was returned to local governments, and verification was made easier.

A historian of U.S. tax policy wrote in 1987 that, "measured by its fairness and by the technical skill that went into it, the Wisconsin income tax legislation of 1911 was a landmark and a beacon to the federal government and the forty-five other states which since have passed income tax laws and depend on them for a substantial share of their revenue."

For more details, see The Establishment of Wisconsin's Income Tax ("Wisconsin Magazine of History": Volume 71, Number 1, Autumn 1987) and Genesis of Wisconsin's Income Tax Law: An Interview with D.O. Kinsman ("Wisconsin Magazine of History": Volume 21, Number 1, September 1937)