History and Purpose of the Amendment

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.


Annotations

INCOME TAX

The ratification of the Sixteenth Amendment was the direct consequence of the Court’s 1895 decision in Pollock v. Farmers’ Loan & Trust Co.1 holding unconstitutional Congress’s attempt of the previous year to tax incomes uniformly throughout the United States.2 A tax on incomes derived from property,3 the Court declared, was a “direct tax,” which Congress, under the terms of Article I, § 2, and § 9, could impose only by the rule of apportionment according to population. Scarcely fifteen years earlier the Justices had unanimously sustained4 the collection of a similar tax during the Civil War,5 the only other occasion preceding the Sixteenth Amendment in which Congress had used this method of raising revenue.6

During the years between the Pollock decision in 1895 and the ratification of the Sixteenth Amendment in 1913, the Court gave evidence of a greater awareness of the dangerous consequences to national solvency that Pollock threatened, and partially circumvented the threat, either by taking refuge in redefinitions of “direct tax” or by emphasizing the history of excise taxation. Thus, in a series of cases, notably Nicol v. Ames,7 Knowlton v. Moore,8 and Patton v. Brady,9 the Court held the following taxes to have been levied merely upon one of the “incidents of ownership” and hence to be excises: a tax that involved affixing revenue stamps to memoranda evidencing the sale of merchandise on commodity exchanges, an inheritance tax, and a war revenue tax upon tobacco on which the hitherto imposed excise tax had already been paid and that was held by the manufacturer for resale.

Under this approach, the Court found it possible to sustain a corporate income tax as an excise “measured by income” on the privilege of doing business in corporate form.10 The adoption of the Sixteenth Amendment, however, put an end to speculation whether the Court, unaided by constitutional amendment, would persist along these lines of construction until it had reversed its holding in Pollock. Indeed, in its initial appraisal11 of the Amendment, it classified income taxes as being inherently “indirect.” “[T]he command of the Amendment that all income taxes shall not be subject to apportionment by a consideration of the sources from which the taxed income may be derived, forbids the application to such taxes of the rule applied in the Pollock Case by which alone such taxes were removed from the great class of excises, duties and imports subject to the rule of uniformity and were placed under the other or direct class.”12 “[T]he Sixteenth Amendment conferred no new power of taxation but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged . . . .”13


1 157 U.S. 429 (1895); 158 U.S. 601 (1895).

2 Ch. 349, § 27, 28 Stat. 509, 553.

3 The Court conceded that taxes on incomes from “professions, trades, employments, or vocations” levied by this act were excise taxes and therefore valid. The entire statute, however, was voided on the ground that Congress never intended to permit the entire “burden of the tax to be borne by professions, trades, employments, or vocations” after real estate and personal property had been exempted, 158 U.S. at 635.

4 Springer v. United States, 102 U.S. 586 (1881).

5 Ch. 173, § 116, 13 Stat. 223, 281 (1864).

6 For an account of the Pollock decision, see “From the Hylton to the Pollock Case,” under Art. I, § 9, cl. 4, supra.

7 173 U.S. 509 (1899).

8 178 U.S. 41 (1900).

9 184 U.S. 608 (1902).

10 Flint v. Stone Tracy Co., 220 U.S. 107 (1911).

11 Brushaber v. Union Pac. R.R., 240 U.S. 1 (1916); Stanton v. Baltic Mining Co., 240 U.S. 103 (1916); Tyee Realty Co. v. Anderson, 240 U.S. 115 (1916).

12 Brushaber v. Union Pac. R.R., 240 U.S. 1, 18–19 (1916).

13 Stanton v. Baltic Mining Co., 240 U.S. 103, 112 (1916).