A Series on the Constitutional Amendments: The Sixteenth

‘When there’s a single thief, it’s robbery. When there are a thousand thieves, it’s taxation.’

Vanya Cohen

Taxes are a necessary evil and most people accept that. There are the odd people who claim that all taxation is theft and that the government shouldn’t exist at all, but those are far and few between. The primary arguments come from the methods of taxation and how much to tax. In the United States only Congress may pass laws regarding taxation and collection on a national level. This is stated in Article I of the Constitution which enumerates the powers of the legislative branch. In the text it specifies that it may only collect taxes on duties, imposts and excises.

There was no federal income tax allowed under Constitution, but the idea of such a tax was gaining popularity in the late 1860s and early 1900s. The movement towards a federal income tax came to a head in the supreme court case of Pollack v. Farmers; Loan and Trust Co. (1895). The federal government attached a 2% income tax to a tariff act passed in 1894. This income tax applied to those making $4,000 a year which is the equivalent of over $100,000 in 2018. In the adjudication of the law, the Supreme Court found that the income tax was a direct tax and needed to be apportioned which meant spread proportionally across the population.

In 1909, the Sixteenth Amendment was drafted to adjust the taxation power of the Federal Government. The text reads, “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” The Article I powers of Congress allowed direct taxes to be levied on duties, imposts, and excises; however, direct taxes had to be proportionate to the population of the states. The apportionment issue was the largest roadblock to the federal income tax as it would be very difficult to levy such a tax with such a wide range of population. This resulted in the Sixteenth Amendment containing the clause regarding apportionment.

The passage of this amendment was not smooth. It took until 1913 for the requisite three-fifths of the states to ratify the amendment. This meant that all forty-eight states were now allowed to have their citizens’ incomes taxed by the federal government. This is the first amendment with states that still have not ratified it to this day. There are even two states (Florida and Pennsylvania) that never even held a vote on the amendment. Nevertheless, the sixteenth amendment was officially ratified on February 13, 1913 when Delaware became the thirty-sixth state to ratify.

Many individuals immediately took umbrage with the brand new Amendment, and the first case to deal with complaints resulting from this was Brushaber v. Union Pacific Railroad Co.(1916). A man named Frank Brushaber contended that taxes on his dividends from stock held in a railroad company should be apportioned as it was a direct tax. The man further argued that since this was a tax on property, his fifth amendment rights were being violated as his property was being taken without due process. The verdict as unanimous that per the sixteenth amendment the tax didn’t have to be apportioned. They also pointed out that the tax on his income could come from any source per the amendment itself.

In Commissioner v. Glenshaw Glass Co.(1955) the Supreme Court again redefined what is considered income. They ruled in this instance that any influx of money is considered income. As a result of this ruling things such as bonuses, reparations and inheritance is considered income and thus taxable by the federal government.

In modern America income tax from the federal government is a part of everyday life. Income tax has also grown in popularity in the individual states as well to the point that forty-three of the fifty states have a state income tax on top of the federal one. The result of the income tax has been more money to the government and the expansion of centralized power in the United States. While some taxation isn’t theft as many on the hard libertarian side claim, excessive taxation is. When a citizen is taxed twice and even three times on every dollar they earn the incentive to work hard goes down and motivation declines. Abolishing the sixteenth amendment may not be the answer, but solutions can be found provided we are committed to the decentralization of power.

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