During this week in 1913, several states ratify the 16th Amendment. A proclamation would soon be issued by the U.S. Secretary of State, officially making the 16th Amendment part of the United States Constitution.
The 16th Amendment, of course, authorizes the federal government to impose federal income taxes on American citizens. But do you know why an amendment was needed in the first place?
The roots of the issue could be found in Article I of the U.S. Constitution.
For many decades, that constitutional provision required that all “direct taxes” be “apportioned among the several States . . . according to their respective Numbers.” In other words, direct tax collections had to be made in proportion to the states’ populations or they couldn’t be made at all.
That requirement, of course, made an income tax impractical. Not that Congress didn’t try.
The first move towards an income tax came during the Civil War. How would the Union pay for war expenses? Congress soon passed the Revenue Acts of 1861 and 1862, which included an income tax. These taxes were later allowed to expire, but Pandora’s Box had been opened. Congress attempted to pass another income tax in 1894.
The goal that year was to lower tariffs and to replace lost revenue with the income tax. The tax rate then proposed was 2% of any income over $4,000. Low, by today’s standards, but the tax was still challenged.
The Supreme Court struck it down in the case of Pollock v. Farmers’ Loan & Trust Company.
“The men who framed and adopted [our Constitution] had just emerged from the struggle for independence,” Chief Justice Fuller wrote on behalf of the Court, “whose rallying cry had been that ‘taxation and representation go together.’ The mother country had taught the colonists . . . that self-taxation constituted the main security against oppression. . . . [The colonists] were careful to see to it that taxation and representation should go together, so that the sovereignty reserved should not be impaired . . . .”
Needless to say, the 16th Amendment turned the Chief Justice’s words on their head.
Some will argue that this is appropriate: The old rules were simply too cumbersome and created inefficiencies. A modern, global society has created the need for a more efficient means of taxation. Others, however, will argue that the income tax has escaped the bounds of its original intent.
Has the Amendment resulted in a more massive, more costly, more intrusive federal government than we otherwise would have had?
Calvin Coolidge presumably thought so. Just one short decade after the 16th Amendment was ratified, President Coolidge spoke to the American people about a federal budget that had already grown larger.
“I want the people of America to be able to work less for the government,” he said in a speech on the White House grounds, “and more for themselves. I want them to have the rewards of their own industry. This is the chief meaning of freedom. Until we can reestablish a condition under which the earnings of the people can be kept by the people, we are bound to suffer a very severe and distinct curtailment of our liberty.”
Does an income tax undermine a direct relationship between taxes and representation, as Chief Justice Fuller described? Has that worked to our detriment? The debate is unlikely to be resolved anytime soon.
Andrew Glass, Congress enacts an income tax law (Politico; Aug. 28, 1894)
Calvin Coolidge, Speech on Taxes, Liberty, and the Philosophy of Government (Aug. 11, 1924) (reprinted HERE).
Joseph R. Fishkin et al., The Sixteenth Amendment (National Constitution Center)
Historical Highlights: The Ratification of the 16th Amendment, February 03, 1913 (U.S. House of Representatives website)
Pollock v. Farmers' Loan & Trust Company, 157 U.S. 429 (1895)
Sixteenth Amendment: The Personal Income Tax (Library of Congress: Chronicling America) (featuring links to many newspapers from the early 1900s)
The Constitution: Timeline for ratification of all constitutional amendments (LexisNexis website)
U.S. Constitution, Art. I, Sec. 2, cl. 3