Cries for the return of the income tax continued inside and outside of government, but efforts were voted down by the Republican majority in Congress, saying that additional revenue was not needed due to already existing surpluses in the budget. Those surpluses not only existed, but they soared about $100 million per year in the 1880s (Witte 70). The success of the 1880s ended abruptly with the Panic of 1893, which was "caused by a run on gold and fears in the eastern financial community that the nation would go off the gold standard for the dollar" (70). The panic lowered government Slocum 4 revenues and soon eliminated existing surpluses. At the same time, the Democratic Party gained control of both the presidency and Congress for the first time in the post-Civil War era. Formal debates over the renewal of the income tax soon followed, and a flat tax of two percent on all income was approved (Witte 70-73). Although both parties almost unanimously approved the first income tax because, according to Susan B. Hansen, investments in the war-torn North were better protected if they were taxed than if they were lost in the war effort, many opponents gave their reasons for abolishing this tax. The new income tax was called undemocratic, socialist, and impossible to fairly implement, but these reasons were easily defeated with rational thought (Hansen 80, Seligman 518-21). Not being able to win in Congress, opponents of the income tax then turned to the only body left: the Supreme Court. According to the United States Constitution, "all duties, imposts, and excises shall be uniform throughout the United States" and "no capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration hereinbefore directed to be taken" (Seligman 531). After two hearings, the U.S. Supreme Court, by a 5-4 decision, declared the 1894 income unconstitutional because it was a direct tax and could not be assessed according to state population (Paul 59, Witte 73, Seligman 531).
