16th amendment when was it passed

Today, there are nineteen tax court judges who are appointed by the President for terms of fifteen years. In United States v. Sullivan , the Supreme Court holds that financial gains made from illegal activities, such as drug sales or gambling, are taxable income under the Revenue Act of The Court finds that there is no reason to exclude revenues made from illegal businesses.

The statute specifically requires payment from businesses of any kind and taxes are due as if the business were lawful. To pay the rising costs of the World War II, Congress imposes income taxes on people with average incomes. It remains the largest of the bureaus within the Department of the Treasury and is responsible for collecting federal taxes. The federal government once again depended on "regressive" tariff duties and excise taxes as its chief sources of revenue.

Several attempts were made in Congress over the next 20 years to restore the "progressive" income tax. Support came largely from Southern and Midwestern populists who attacked the wealthy for flaunting their millions by building mansions and spending extravagantly while barely paying any taxes at all. The election of produced a Democratic president Grover Cleveland along with Democratic control of both houses of Congress.

This ended the long reign of the Republicans who had opposed restoring the income tax. Unlike the Civil War income tax, this one was not graduated. This type of income tax is sometimes called a "flat tax. Opponents of the new income tax claimed that it was a socialistic confiscation of wealth by the federal government.

Barely a year after it was enacted, the Supreme Court declared the tax unconstitutional. In a ruling, the high court decided that the income tax was forbidden by Article I, Section 9, of the Constitution. This prohibits direct taxes on individuals unless apportioned on the basis of the population of each state. The majority of justices ruled against the tax law even though the Supreme Court had earlier upheld the similar Civil War income tax.

Farmer's Loan and Trust Co. As the progressive reform movement began to gain strength at the turn of the century, interest in the income tax revived.

One of the supporters of the income tax was Cordell Hull , a Democratic congressman from a poor rural district in Tennessee. Hull who later became President Franklin D. Roosevelt 's secretary of state put together a coalition of progressive Democrats and Republicans.

They tried to attach income tax bills to tariff legislation making it more difficult to pass. Most Americans disliked tariffs since they drove up the price of many goods. Hull and his allies promised not to stall the passage of tariff laws, while Taft came out in favor of a corporation tax and a constitutional amendment authorizing Congress to enact a federal income tax.

A constitutional amendment was necessary because the Supreme Court had struck down the earlier income tax as unconstitutional. But the process of amending the Constitution made this difficult. First, the income tax amendment would have to pass both houses of Congress by two-thirds majorities. Then, three-fourths of the state legislatures would have to ratify it.

Only after ratification would Congress have the clear power to pass an income tax law. At first, few thought the income tax amendment had much of a chance surviving a vote in Congress. But the unpopularity of high tariffs eased the amendment through both the Senate and the House. In just a few days during the summer of , the proposed 16th Amendment was approved by the Senate and the House Thirty-six state legislatures had to ratify the 16th Amendment before it could go into effect.

The public and most newspapers seemed to favor it. The main argument for ratification was that the amendment would force the wealthy to take on a fairer share of the federal tax burden that had in the past been largely carried by those earning relatively little. Only a few critics spoke out forcefully against the amendment. Because of Hylton and Springer , almost all commentators at the time thought Pollock was clearly wrong.

Nevertheless, with the case on the books—whether rightly decided or not—an unapportioned income tax was impossible without a constitutional amendment. If Pollock was wrong, the Amendment was legal surplusage. If Pollock was right, the Amendment changed the law. What direct taxes remain subject to apportionment? In any event, the Supreme Court has had no recent occasion to focus on the Amendment. But that view would permit Congress to define the limits on its own power. The preeminent example is Eisner v.

Macomber , where the Court struck down an unapportioned income tax as applied to certain stock dividends.

Although the income tax as a whole was valid—it was direct, but exempted from apportionment by the Amendment—the Court held that the tax on stock dividends effectively fell on property, not income. Rejected though they are by most scholars today, those old cases might still have life. By citing Pollock , the Court accepted the proposition that a tax on any property including the income from that property , not just land, is direct.

That was a slight, but reasonable, expansion of Hylton. Interest on bonds should be treated the same as rents from land. But Chief Justice Roberts may not have been thinking about any of this; the citation to Macomber might just have been a throwaway. And, even if the distinctions between direct and indirect taxes and between taxes on income and other taxes retain constitutional significance, and I think they do, characterization issues have declined in importance because of the Sixteenth Amendment.

If Congress does look to new sources of revenue, however—because of burgeoning budget deficits, say—the old interpretive issues may return. The Constitution does not exist in a vacuum, sealed off from the Court and the People who interpret it and reason from it over time.

To really understand what the Sixteenth Amendment is about, one needs to understand its context: the intense conflict in the late nineteenth and early twentieth century over the future of the American economic system—a conflict that still echoes today.

This was the period in American history in which powerful, nation-spanning corporations first took control of large swaths of the national economy. Think of the railroads, or monopolies like Standard Oil. These corporations were more powerful than state governments.

The dynasties that owned them had great political clout and more concentrated wealth than Americans had ever seen. Inequality was rising to the point that many Americans began to fear that our constitutional democracy might be lost, replaced by an economic and political oligarchy.

In response, waves of reformers sought major changes. One was a change to the tax code. Instead of relying exclusively on consumption taxes that fell most heavily on ordinary people, the Populists and later the Progressives wanted a federal income tax that would fall most heavily on the enormous new fortunes of the era. At the time, few thought there was any constitutional problem with an income tax.

Precedents from as far back as and as recently as made that clear. As lawyers, they had handled the work of the new large corporations and monopolies. They feared the federal income tax as a form of socialism, and in Pollock they found a way to strike it down. The decision in Pollock provoked enormous popular outrage.

Rarely in American history has a single Supreme Court decision been so clearly and decisively rejected by the American people in this manner. What the Sixteenth Amendment rejected was a vision of a weak federal government that could subsist only on what were essentially consumption taxes—a government that could never be powerful enough to confront, regulate, and break up the enormous new fortunes and monopolies of the Gilded Age.

But the conflict over the main constitutional powers of the federal government—the power to tax, the power to spend, the power to regulate Commerce, and the Reconstruction power to promote liberty and equal citizenship—has never really ended.

Conflict over the power to tax could rear its head again. For instance, suppose that in response to rising levels of economic inequality, Congress passes a tax on wealth. Like the income tax a century ago, a wealth tax would undoubtedly provoke outrage from wealthy people. No tax has been apportioned since It makes absolutely no sense, in terms of fairness or politics, to apportion any tax other than a head tax.