The 16th Amendment to the Constitution of the United States was ratified in October 1913, giving Congress the right to enact an income tax. They then promptly passed the Revenue Act of 1913, levying a 1% tax on net personal incomes above $3,000 with a 6% surtax on incomes above $50,000, payable by March 1, 1914. In today’s dollars that would translate to approximately 1% tax on net personal incomes above $76, 000 and a 6% surtax on incomes above $12 million.
But, paying those taxes that first year wasn’t easy for Fairbanksans. To file the returns, tax forms supplied by the Treasury Department had to be sent to Fairbanks up the nearly 400 mile ice trail via dog teams and horse-drawn sleighs from Valdez. Once completed, the forms and payment had to be shipped back down the same ice trail by the same methods by which they first arrived. Due to shipping delays and vast distances within Alaska, the good residents of Fairbanks were faced with the cold-hearted penalty of living in the North during that first year of Income Tax collection.
Fairbanks Daily Times – February 11, 1914
INCOME TAX PAYERS MUST PAY PENALTY
“Owing to the fact that the tax forms, upon which Fairbanksans are obliged to pay an income tax, arrived here late, the people affected by the new law will be compelled to pay a penalty, according to the statement of a prominent attorney, who is familiar with the provisions of the act of Congress and the rules of the Treasury Department.
The blank forms, upon which the returns must be made to the collector of Internal Revenue, state specifically that a fine of from $20 to $1,000 will be imposed upon the delinquents who do not have their reports in the hands of the collector at Tacoma before March 1, 1914.
Note: Fortunately local attorney and member if Igloo No. 4, John A. Clark, appealed to the Tacoma Collector for the Internal Revenue Dept. requesting an extension of the filing deadline for residents of the Tanana Valley. The Tacoma office granted Fairbanks an extra month to get their tax reports filed and paid. The initial results of the first income tax were quite interesting:
Fairbanks Daily Times- April 4, 1914
INCOME TAX RETURNS NUMBER 100
When all the income tax returns had been handed to George Hutchinson, deputy collector of the internal revenue, it was found that more than 100 people admitted receiving more than $3,000 per year, either in salaries or from other sources. It is stated, however, that there are others who receive more than $3,000 per year, who have failed to report, and steps probably will be taken in the near future to force them to pay the tax due the government.
Note: In 1914, Fairbanks had a population of about 2,300 persons and only 100 (roughly just over 4% of the total population) claimed more than $3,000 in annual income which is equal to about $76,000 in today’s money. Of course there were some folks who lied or failed to file; but that dismal figure really reflects the severe downturn in the Fairbanks economy after the mines were depleted using the drift mining method.
Fortunately, the building of the Alaska Railroad and opening of the Healy coal mines revived the Fairbanks economy. The Healy coal mines led to later dredging operations and subsequent prosperity to the Golden Heart City. This taxing History Nugget was proudly brought to you by Men’s Igloo No. 4 and Women’s Igloo No. 8 of the Pioneers of Alaska.