Understanding Taxation

Taxation is a means by which the Federal Government, as well as individual states, impose fees on items as well as monetary considerations in order to support the aforementioned Federal and State governments. According to the Constitution, taxation is overseen and regulated by the Sixteenth Amendment. In accordance with this Amendment, Congress has the authority to set forth taxation without doing so in relation to any apportionment. This term of allocation may be based upon resources, such as the Census, for instance.

Such a legal activity as taxation stems all the way back to the Civil War. In order to garner appropriate income to sponsor such a momentous war, income tax was instituted with the advent of the Revenue Act of 1861. This Act set forth a flat tax rate of 3% on all annual income reaching amounts above that of $800. In subsequent years, however, the case of Pollock v. Farmers' Loan & Trust Co. came about.

In this case, the Supreme Court ruled that specific taxes on individual incomes was unconstitutional, especially in relation to unapportionment of direct taxes or rather taxes paid "directly" to the Government. It determined that such a tax should mirror that of taxes imposed upon property and should, thus, be apportioned accordingly. They reasoned that similar burdens existed in both areas of concern. That which was garnered from this case in terms of taxation practices was the distinction that existed between that of "direct" versus "indirect" taxes.

The ruling that stemmed from the Pollock case was soon overturned, however, in Brushaber v. Union Pacific Railroad. In this Supreme Court case, it was decided that the Sixteenth Amendment took precedence over it and, therefore, deemed it invalid. A term of taxation, such as "gross income", may find its origins in Commissioner v. Glenshaw Glass Co. By means of this case, the Supreme Court ruled that taxes be imposed on "accessions of wealth" that individuals have sole control over. Under such a ruling, amounts garnered from any area of one's life will all comprise a taxpayer's income, barring any specification of exemption as set forth by Congress.

Therefore, though interpretation of the Sixteenth Amendment may be seen as the Amendment by which taxation was enforced, it would actually be more appropriate to see it in a modified light. This new reasoning would be composed of the fact that the basis of the Sixteenth Amendment, in terms of taxation, was that which could be described by its placing authority for Congress to impose income taxes without basis upon apportionment among individual states.

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