In 1913, the 16th Amendment was passed, giving the government the right to collect income tax in order to begin paying service fees to the Federal Reserve, which had just taken control of creating U.S. currency from the U.S. Treasury. According to some, the 16th Amendment was directed only at capital gains income and was never intended to tax wages or salaries, which at the time were considered an equal exchange of goods/services akin to bartering and were not considered “profit” income.
Because an income tax makes it necessary for citizens to disclose all their financial records, it is considered by some to be an invasion of privacy. The income tax on wages could be replaced by less intrusive and less costly alternative forms of taxation, such as excise tax, tariffs and fiat currency, which were the government’s main means of collecting taxes before 1913.
Currently, about half the population pays almost no income tax because they earn so little. In 2014, the top 4.2% of tax payers paid 57.5% of the total revenue collected from income tax. The top filers pay mostly capital gains income tax, not wage income tax. The bottom 84% contributed just 20% of total income tax revenue. See Pew Research.
Abolishing the income tax on wages for the bottom 90% of the population would save much of the approximately $13 billion used to run the IRS each year and would end up making little difference overall in the government’s balance sheet–and would significantly improve the balance sheet of most US citizens.