How Republicans Once Championed the Federal Income Tax
The Civil War was then costing the Treasury $2 million a day. ... The answer was a federal tax on incomes. It would be manifestly unjust to allow the large money operators and wealthy merchants, whose incomes might reach hundreds of thousands of dollars, to escape from their due proportion of the burden, said Thaddeus Stevens, a House Republican leader and wealthy iron manufacturer. The staunchly Republican Chicago Tribune agreed: The rich should be taxed more than the poor.
After experimenting with a 3 percent tax on incomes of more than $800 in the summer of 1861, Congress expanded the income tax in 1862. It placed a tax of 3 percent on incomes exceeding $600 and of 5 percent on those of more than $10,000. The weight must be distributed equally, Representative Justin Morrill, a Vermont Republican, explained, not upon each man an equal amount, but a tax proportionate to his ability to pay. There was little debate.
Republican congressmen not only imposed an income tax, but also shifted tax collection from the states to the federal government. A new national system would be cheaper to institute than a variety of state systems, the measures Republican sponsor argued. There was an additional benefit: If Americans paid taxes to the national government, they would have a personal stake in its survival and stability. In 1862, Republicans created the Internal Revenue Bureau in the Treasury Department, the precursor to the Internal Revenue Service.
The new system worked so well that it was expanded after two years. As the national debt climbed toward $1.5 billion, Americans clamored for Congress to raise money. What do the people of the United States ask of this Congress? demanded a New Hampshire Republican. To take off taxes? No, sir, they ask you to put them on. The universal cry of this people is to be taxed.
http://www.bloomberg.com/news/2013-04-04/how-republicans-once-championed-the-federal-income-tax.html
It would take another 50 years, but by 1912 the big money interests who did not share the "cry of the people" to be taxed would drive out the more progressive members of the Republican Party.