Progressive Era to New Era

In the early twentieth century, American public finance changed dramatically. The 16th Amendment gave Congress clear constitutional authority to levy a federal income tax, and the first Form 1040 arrived in 1913. At first, however, this was not the broad-based tax many people imagine today: because of exemptions and deductions, fewer than 1 percent of Americans paid the new tax in its early years. Over time, especially during World War I, the federal revenue system became more modern and more powerful.