The Sixteenth Amendment states, “The Congress shall have the 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.” Congress proposed the amendment after the U.S. Supreme Court declared that federal law taxing personal income was unconstitutional. The adoption of the income tax was one of the goals pursued by leaders of the Progressive movement at the turn of the century. In many ways, the income tax symbolized the Progressive cause since it is based on an individual’s ability to pay the tax and is considered a more equitable way of raising funds. Fiscally, the income tax was designed to reduce the federal government’s reliance on regressive consumption taxes.
|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.|
Along with numerous federalism issues, the federal income tax was a contentious issue of the Civil War conflict. President Abraham Lincoln imposed a temporary income tax to deal with financing the war, which was challenged and upheld after the fact in Springer v. United States (1881). However, in 1894, Congress passed a limited federal income tax during peacetime, which was challenged and overturned as unconstitutional in 1895 with the Pollock v. Farmers Loan and Trust (157 U.S. 429) decision. The Court held in Pollock that on the grounds of state sovereignty and the protections of states’ rights under dual federalism, the tax law was unconstitutional because it was a direct tax that had to be apportioned among the states according to population.
In 1909, the language proposing the constitutional amendment was added to a Senate tariff bill. This created a bipartisan coalition in support of the bill that included Democratic reformers backing the amendment and Republicans wanting the tariff increase. The Republicans were willing to include the amendment because they were confident that it would not be ratified by the states. However, the Progressive sentiment that prevailed in the 1912 presidential election also changed the makeup of many state legislatures as well. The amendment was quickly ratified by the states in 1913.
When it was first applied, the federal income tax affected only a small portion of the public. The Underwood Tariff passed by Congress in 1913 levied a 1 percent tax on personal incomes over $3,000. Most Americans earned far less than this amount; thus, this relatively high threshold excluded all but the wealthiest Americans. Congress kept this rate constant until the United States entered World War I, when it began to utilize the income tax to finance the war effort. Since that time, the federal government’s reliance upon this revenue source has continued to grow and the several state income tax systems tied to the federal tax regulations have expanded this impact across the intergovernmental fiscal system.
Income taxes, by far, account for most of the revenue generated by the federal government. In this way, one of the unintended consequences of the Sixteenth Amendment is that it has become the basis for the U.S. government’s modern revenue system. And, as Stephen Skowronek (1982) has noted in his seminal work on Progressive reforms during the industrialization era, the Sixteenth Amendment provided critical fiscal resources for the eventual expansion of government capacity in the building of modern public administration.
George Anastaplo, The Amendments to the Constitution (Baltimore: Johns Hopkins University Press, 1995); Kermit L. Hall, ed., The Oxford Guide to United States Supreme Court Decisions (New York: Oxford University Press, 1992); Ralph Rossum and G. Alan Tarr, American Constitutional Law (New York: St. Martin’s, 1983); and Stephen Skowronek, Building a New American State: The Expansion of State Administrative Capacities, 1877–1920 (Cambridge: Cambridge University Press, 1982).
Joseph R. Marbach, Michael W. Hail, and Jeremy L. Hall
Last Updated: 2006