The 16th Amendment to the United States Constitution Explained

What Is The Sixteenth Amendment?

The 16th Amendment was ratified in the year 1913. It states that Congress has the right to levy taxes on income of any kind. The tax is imposed without any regard to the demographics and also without distributing it among states. The Sixteenth Amendment of the United States Constitution was vital in making the federal government extremely powerful in the 20th century. It vested power to the government, allowing it to develop the income tax for the whole country. The income tax became the federal government’s most significant source of acquiring revenue. Unlike in the nineteenth century, when the government got most of its revenue mainly from excises, duties, and imposts. The Sixteenth Amendment was one of the early twentieth century amendments that were promoted by Progressives. It brought changes to a decision that had been passed by the Supreme Court in 1895. The decision had made income tax all over the country unattainable.

Comprehending The Sixteenth Amendment

After the Congress approved a joint resolution calling in July of 1909, the Amendment was ratified in Alabama after one month. However, it would only come into effect after it was approved in New Mexico, Delaware, and Wyoming. The states approved, and the Sixteenth Amendment of the United States Constitution was ratified in 1913 on February 3rd. In the same year, 1913, the federal government levied the first permanent income tax. Seven brackets were involved in the first income tax schedule. The text rates were 1 percent for $20,000 income, and for income that is over $500,000, it was 6 percent.

In total, the federal government was able to raise a total amount of $28.3 million.

Federal Government’s Income Tax Before The Sixteenth Amendment Was Enacted

Prior to the Sixteenth Amendment, income tax used to be imposed by Congress. The tax was as follows, 3 percent for people who earned $600 annually and 5 percent for those who made over $10,000. The purpose of collecting the tax was to fund the Civil War. The law expired in 1872 after the rates were increased in 1864. Most of the revenue was, however, charged from tariffs and excise taxes. In 1894, Congress was challenged in court by Charles Pollock after it wanted to impose an additional income tax of 2 percent for earnings over $4,000. Pollock won after the Supreme Court ruled in favor of him, and the tax was suspended.

Article I, section 2, clause 3 of the United States Constitution influenced the reasoning behind the ruling. In terms of the United States Constitutional law, a direct tax is a tax imposed on a property through ownership. Pollock had ten shares of a company known as the Farmers’ Loan and Trust, dividends, and property rent. Therefore the description of direct tax applied to Pollock’s situation. Before levying a direct tax, it had to be apportioned by Congress among states. Each state was given an amount it had to raise.

However, the Sixteenth Amendment brought change to that need. The states that mainly supported the changes were mostly the ones in the West and South. Those regions provided tariffs that were the federal government’s primary source of revenue. These tariffs made the cost of living very high.