Internal revenue is the income a government derives from sources within the country, in contrast to income from export and import duties. It includes income, payroll, estate, gift, sales, and excise taxes. Excise taxes are levied on the manufacture, sale, or use of one or a few goods or services.
In the United States,
internal revenue amounts to about 95 percent of the total revenue of the federal government. The U.S. Constitution does not indicate how the various kinds of taxes are to be divided between the federal and state governments. But customarily, land and other property taxes and sales and excise taxes have gone chiefly to the states. The federal government relies mainly on income and payroll taxes.
The Internal Revenue Service,
an agency of the Department of the Treasury, administers and enforces U.S. internal revenue laws. The Internal Revenue Service checks tax returns, collects tax payments, and issues refunds.
History.
Early in United States history, internal revenue accounted for only a small part of the total government revenue. The federal government depended mainly on customs duties as a source of revenue. The proportion between customs duties and internal revenue remained roughly the same until after the American Civil War ended in 1865. Since that time, customs duties have become much less important.
About the time of the Civil War, the government began to seek a new tax with which to increase its revenue. An income tax was levied in 1862 and was continued for about 10 years. A second income tax was levied in 1894, but the Supreme Court declared it unconstitutional. In 1913, the 16th Amendment to the U.S. Constitution allowed Congress to levy income taxes without the former constitutional restrictions.
The first excise tax on distilled spirits was levied in 1791. The tax caused the unsuccessful Whiskey Rebellion of 1794, which was led by farmers in western Pennsylvania. Taxes on alcoholic beverages brought little revenue until the repeal of prohibition in 1933. They now make up about 1 percent of all internal revenue.
Today, almost all federal income is derived from internal revenue. Over 90 percent of this revenue comes from income and payroll taxes. Much of the rest comes from excise taxes levied on alcohol, gasoline, and tobacco and from estate and gift taxes.
In Canada, federal revenue comes mainly from income taxes. The federal government also levies a sales tax and excise taxes on such items as alcohol, gasoline, and tobacco. Provincial governments levy income taxes, property taxes, sales taxes, and excise taxes.
