A Look At Income And Taxation Relative To Gold

In 1913, the U.S. introduced the 16th Amendment to the Constitution, which established a federal income tax, and the Federal Reserve Act, which created the central bank. At that time, the average annual income was around $600, equivalent to 30 ounces of gold. The income tax applied only to incomes over $3,000, with a 1% rate on income above that amount. Today, with gold valued at $2,500/oz, the average salary of $60,000 is 20% below the 1913 level in gold terms. It now takes two earners in most households to achieve the gold equivalent income of a single earner in 1913. The income tax threshold should be indexed to gold, meaning only those earning over $360,000/year would pay income tax. However, the current system has led to a significant increase in tax rates and the addition of state income taxes, making it an economic disaster for households. If Americans in the early 20th century knew the consequences, they would not have supported the Federal Reserve or the 16th Amendment.