Sixteenth Amendment (Encyclopedia Britannica)
Taxing Power (Cornell Law School)
The 16th Amendment: Chronicling America (Library of Congress)
Sixteenth Amendment Timeline (Annenberg Classroom)
Why We Pay Taxes (History Channel)
The Ratification of the 16th Amendment (US House of Representatives)
A Short History of Taxes (Forbes)
The Sixteenth Amendment, ratified in 1913, played a central role in building up the powerful American federal government of the twentieth century by making it possible to enact a modern, nationwide income tax. Before long, the income tax would become by far the federal government’s largest source of revenue. This Amendment was part of a wave of federal and state constitutional amendments championed by Progressives in the early twentieth century. The Amendment reversed an 1895 Supreme Court decision that had made a nationwide income tax effectively impossible by invoking what today seems an arcane distinction between “direct” and “indirect” taxes.
The Taxing Clause in Article I, Section 8, grants Congress the broad “Power To lay and collect Taxes, Duties, Imposts and Excises,” but Article I also provides (twice) that a “direct” tax must be apportioned among the states on the basis of population. This means that if a tax is a “direct” tax, a state with one-tenth of the national population must bear one-tenth of the total liability. It doesn’t matter whether one state has lots of whatever is being taxed (such as valuable land) and another state has very little—the states have to bear the burden according to population. That requirement makes direct taxation cumbersome, and often impossible.
For other taxes—the so-called “indirect” taxes—there is no apportionment rule. The Constitution requires only that “all Duties, Imposts and Excises shall be uniform throughout the United States.” This is a relatively easy requirement to satisfy: what’s taxed and the tax rates mustn’t vary from state to state. In the nineteenth century, most of the government’s revenue came from “duties, imposts and excises” on consumption of various goods.
Thus, whether a tax is direct or indirect has mattered—a lot. So what is a “direct tax”? At a minimum, it includes “capitations” (specifically mentioned in the Constitution and generally understood to be lump-sum head taxes—each person pays the same) and also taxes on land. The Framers thought these were “direct.” But that may be it. An early Supreme Court case, Hylton v. United States (1796), approving an unapportioned tax on carriages, said as much, and in the nineteenth century the Supreme Court upheld several other kinds of unapportioned taxes against constitutional challenges. In Springer v. United States (1881), the Court even approved the unapportioned Civil War income tax. Continue reading from Constitution Center
A few years after the income tax amendment was ratified, the United States entered World War I. As in the Civil War, Congress turned to the income tax to quickly raise large amounts of revenue. In 1917, Congress lowered the standard exemption to $1,000 for individuals thus expanding the taxpayer pool. At the same time, the lawmakers increased the base tax rate from 1 percent to 2 percent. Those earning over $1 million were taxed at the unheard of rate of 50 percent (this rose to 77 percent by the end of the war).
With the income tax increases, federal receipts climbed from under $1 billion in 1917 to nearly $4 billion in 1918. At war's end, about 60 percent of federal tax money came from the income tax. It replaced tariff duties and excise taxes as the main source of revenue for the U.S. government. Tax rates were reduced after the war. But Congress had discovered how easy it was to pump enormous amounts of money into the U.S. treasury.
Today, more than 80 years after the ratification of the 16th Amendment, the income tax has changed dramatically. Unlike 1913, most Americans today must pay some federal income tax. Instead of the $71 million collected in 1913, the federal government currently collects over $500 billion in income taxes each year (plus another $117.5 billion from corporations). The 15-page tax code has expanded to more than 1,000 pages. And today, more people grumble about paying income taxes. Continue reading from Constitutional Rights Foundation
