The 16th Amendment

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The 16th Amendment gives the Federal Government the power to levy an income tax on all income earners in the United States. Proposed by Congress in 1909, the 16th Amendment went into law on February 3, 1913, after Delaware became the 36th state to ratify.

This was not the country's first income tax. Although Secretary of the Treasury A.J. Dallas proposed such an idea during the War of 1812, Congress didn't much like the idea. The Civil War was a different matter, and Congress passed the Revenue Act of 1861, which put a 3-percent tax on all annual income more than $800. (That's the early-21st-Century equivalent of more than $20,000.) A slight modification a year later brought the taxable amount down to $600, meaning that it applied to even more Americans. The Revenue Act of 1862 had a four-year lifespan, however, and ended in 1866, a year after the Civil War ended. Another series of federal income taxes lasted until 1872, but the focus turned more fully to tariffs as the country's main source of income.

Pressure grew again for a federal income tax as the 19th Century drew to a close. A Congressional amendment to the 1894 Wilson-Gorman Tariff Act brought back the income tax, on annual incomes higher than $4,000. But a Supreme Court decision that same year, Pollock v. Farmer's Loan & Trust Co., declared this kind of tax unconstitutional.

The Court directed that taxes on dividends, interest, and rental income should be apportioned according to population because they were "direct" taxes but that taxes on income were "indirect" and did not have to be so apportioned. Congress didn't necessarily want to distinguish between direct and indirect taxes, because a significant part of the income-generating population (namely, the richest Americans) were not paying anywhere near what other income-earners were being required to pay) and that was the genesis of what became the 16th Amendment.

Fluctuating tariffs tied to larger fluctuations on globally produced and sold goods led to increased anxiety in the expansive West and Midwest, and support grew for a return to the across-the-board income tax.

That's what the Congress got, in a speech by President William Howard Taft on June 16, 1909, advocating, among other elements, a two-percent federal income tax on corporations. Congress approved the taxes a month later and sent to the Amendment to the states. Alabama was first off the block, ratifying the Amendment just a month later. Eight more states ratified in 1910. The following year saw 22 more; three more voted yes in 1912; and the last two were announced in 1913. It took four years, but the number of states to ratify finally reached the needed number of 36.

Thus, the 16th Amendment to the Constitution of the United States is this:

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.

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David White