When was 16th amendment added to constitution

Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Your Money. Personal Finance. Your Practice. Popular Courses. Taxes Income Tax. Table of Contents Expand. What Is the 16th Amendment? Understanding the 16th Amendment.

Prior Federal Income Tax. Key Takeaways The 16th Amendment to the U. Constitution was ratified in and allows Congress to levy a tax on income from any source.

The change was generally supported by States in the South and West. Prior to the 16th Amendment, the constitution required direct taxes to be proportionate to each state's population. Most Federal revenues came from tariffs and excise taxes. The first national income tax was enacted in but was struck down by the Supreme Court in the case of Pollock v. The 16th Amendment was passed in response to this court case.

The income tax is now the largest source of Federal government revenue. Article Sources. Investopedia requires writers to use primary sources to support their work.

These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear.

Investopedia does not include all offers available in the marketplace. Related Terms What Is the U. Created in , the U. Treasury is the government Cabinet department responsible for issuing all Treasury bonds, notes, and bills. Discover more here. Direct Tax A direct tax is a tax paid directly by an individual or organization to the entity that levied the tax, such as the U.

Tax brackets are set based on income levels. Taxation Taxation refers to the act of levying or imposing a tax by a taxing authority. Taxes include income, capital gains, or estate. Subsequent laws provide more protection, but discrimination endures. Impeachment Impeachment is the process by which Congress brings charges against high-ranking civil officers e. Partner Links. Such a crazy tax would be a non-starter politically. The Court reasoned that taxing income from property was tantamount to taxing the property itself.

Pollock was met with popular outrage. The Populists and later the Progressives put opposition to Pollock at the center of their political program. But how could they reverse it? Many argued that Pollock was so obviously wrong that a constitutional amendment was unnecessary: given a chance, the Court would admit error and overturn Pollock. But getting another case before the Court would have required Congress to enact a new unapportioned tax.

That would have looked like an attack on the Court—not a good strategic move—and, anyway, who could be sure the Court would change its mind? Amending the Constitution was also risky, however. The amendment process is slow, and if the effort failed, an income tax would be delayed indefinitely.

It became clear that, if only for political reasons, an unapportioned income tax was impossible without an amendment. What form should it take? Congress passed the resolution in , and the amendment was ratified four years later; Congress enacted a nationwide unapportioned individual income tax in The country has had one ever since, and the Supreme Court has had little reason to focus on the Amendment that makes this possible.

The power to tax incomes has proved very broad. In Eisner v. Macomber , the Court struck down an unapportioned income tax as applied to certain stock dividends, holding that they effectively fell on property, not income; other cases from the s made similar distinctions. Sebelius , which approved the core of Obamacare. In the meantime, the Sixteenth Amendment matters most because it has forever changed the character of the United States government, from a modest central government dependent on consumption taxes and tariffs on imports to the much more powerful, modern government that fought two World Wars and the Cold War with the vast revenue that came from the federal income tax.

It was intended to be a real limitation on the congressional taxing power; it worked by making direct taxation cumbersome, and often impossible. Many Founders thought direct taxation was dangerous—it lacked built-in protections against governmental overreaching—and it was therefore to be used only in emergencies like war, when revenue needs outweigh other concerns.

And no apportioned direct tax has been enacted since The Sixteenth Amendment is often said to have given Congress the power to tax income, but Congress always had that power. The question answered by the Amendment was whether an income tax is a direct tax that has to be apportioned.

An apportioned income tax would be absurd; one hopes Congress would never enact such a tax. The Supreme Court in Pollock v. Pollock had been a surprise because the dictum in Hylton v. United States —that the only direct taxes are capitations and land taxes—had been accepted throughout most of the nineteenth century.

But, buried in its bombastic language, the Pollock majority actually did a nice job of tying its conclusion to Hylton : a tax on income from property is equivalent to a tax on the property itself. United States , largely reached income from services, not property—as if that made a difference. 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.