Which of the following provided the greatest source of revenue for the federal government?
Group of answer choices
a. The Great Society or War on Poverty policies, authorizing Medicaid taxes
b. Regressive tax policies supported by republicans
c. Excise taxes on cigarettes, gasoline, and alcoholic beverages
d. The sixteenth amendment and federal income taxes
e. The New Deal under FDR authorizing Social Security taxes
The correct answer and explanation is:
The correct answer is d. The sixteenth amendment and federal income taxes.
The Sixteenth Amendment, ratified in 1913, allowed Congress to levy an income tax, which became the primary source of revenue for the federal government. Before the amendment, the U.S. government primarily relied on tariffs and excise taxes to generate income. However, these sources were not sufficient to meet the financial demands of the expanding federal government, particularly during periods of war and economic crisis.
Income taxes, established by the Sixteenth Amendment, provide a stable and growing revenue stream. The tax is progressive, meaning that higher-income individuals and corporations pay a larger share of their income. This has made the federal income tax the largest single source of revenue for the government, eclipsing other forms of taxation. Over the years, the income tax system has evolved, and today it accounts for a significant portion of federal revenue, funding a wide range of government services, including national defense, social programs, and infrastructure.
While other options, such as excise taxes on cigarettes and gasoline, or the New Deal’s Social Security taxes, have contributed to federal revenue, none have matched the scale and impact of income taxes. Social Security taxes, for example, are largely earmarked for specific programs like Social Security and Medicare, and excise taxes are more limited in scope.
The federal income tax system, established by the Sixteenth Amendment, is therefore the greatest source of revenue, allowing the government to fund its operations and social programs in a manner that could not have been achieved with prior tax structures.