Sixteenth Amendment to the United States Constitution

Summary of the Sixteenth Amendment of the United States Constitution

The Sixteenth Amendment of the United States Constitution was passed by Congress on July 2, 1909 and became ratified on February 3, 1913. The amendment allowed Congress to impose a Federal income tax.

The Sixteenth Amendment states the following:

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.

History behind the Sixteenth Amendment to the United States Constitution

After the end of the Civil War, industry and the financial markets in the Northeastern States began to grow, but Reconstruction efforts in the south and agriculture throughout the south and the west continued to struggle. The farmers were forced to sell their products for low prices and pay heavy prices for manufactured goods—mainly from the northern states.

During the 1860s, 1870s, and 1880s, farmers in the south and the west began to form political organizations like the Grange, the Greenback Party, the National Farmers’ Alliance, and the People’s Party. All of these groups wanted legislation for a graduated income tax.

Legislation Begins

In 1894, legislation began that would ultimately lead to the Sixteenth Amendment the United States Constitution. Congress passed the high tariff bill in 1894 which placed a 2-percent tax on income over $4,000. The Supreme Court quickly struck down the bill in a 5-4 decision even though the Court upheld the constitutionality of a Civil War tax in 1881.

Farmers were furious over the Court’s decision, but hostility decreased around 1900 and slowed the need for reform because business was steadily increasing in the United States—even in the southern and western states.

Democratic platforms and the progressive wing of the Republican Party continued to stress legislation for an income tax, and a provision for an income tax was introduced into Congress in 1909 and attached to a tariff bill. Many conservatives in Congress wanted to end proposed legislation for an income tax for good and proposed an amendment to the constitution because they believed three-fourth of states would never adopt the ratification.

The plan didn’t work. The Sixteenth Amendment to the United States Constitution was ratified by state after state until it took effect on February 25, 1913. Secretary of State Philander C. Knox certified the Amendment. Sadly, less than 1 percent of the population paid income taxes in 1913 at a rate of 1 percent of net income because of large deductions and exemptions.

Cases that Appealed the Income Tax

In Brushaber v. Union Pacific Railroad (1916), the Supreme Court ruled that the Sixteenth Amendment to the United States Constitution did not violate the Fifth Amendment and its prohibition against the government taking property without due process.

In Commissioner v. Glenshaw Glass Co (1955), the Supreme Court established standards for gross income. Congress was allowed to make specific exemptions for things like scholarships, life insurance proceeds, and more.