Malcolm Rivera
The 16th Amendment to the U.S. Constitution, ratified on February 3, 1913, established Congress's right to impose a federal income tax. This amendment, which overruled the Pollock decision, gave Congress the 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. Before the 16th Amendment, federal government revenues came mainly from excise taxes and tariffs on imported goods, which were considered regressive as they took a larger percentage of income from poor people than from the rich.
| Characteristics | Values |
|---|---|
| Date of ratification | 3rd February 1913 |
| Amendment number | 16th Amendment |
| Type of tax | Income tax |
| Tax rate | 1% of net income |
| Number of states ratifying the amendment | 42 out of 48 |
| Number of states rejecting the amendment | 6 |
| Previous primary sources of federal revenue | Customs duties (tariffs) and excise taxes |
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The Sixteenth Amendment
The adoption of the Sixteenth Amendment was the culmination of a series of events and political manoeuvring. The idea of a federal income tax was first proposed during the War of 1812 by Secretary of the Treasury Alexander J. Dallas, but it never came to fruition. The concept resurfaced during the Civil War, and Congress introduced a flat tax of 3% on annual incomes above $800 through the Revenue Act of 1861. This was replaced the following year by the Revenue Act of 1862, which imposed a graduated tax of 3-5% on incomes above $600 and specified a termination date for income taxation in 1866. These Civil War income taxes expired in 1872, but they demonstrated the potential of income taxation, with New York, Pennsylvania, and Massachusetts contributing about 60% of the total revenue collected.
In 1909, progressives in Congress attached a provision for an income tax to the Payne-Aldrich Tariff Act. Initially, conservatives proposed the Sixteenth Amendment, believing it would never be ratified by three-fourths of the states. However, they were mistaken, and the amendment gained momentum. The resolution proposing the amendment was passed by Congress on July 12, 1909, and submitted to the state legislatures. The amendment was ratified by 36 states, with Delaware being the 36th state to ratify it on February 3, 1913. Subsequently, six more states ratified it, bringing the total to 42 out of the 48 states. On February 25, 1913, Secretary of State Philander Knox certified that the amendment had been properly ratified, and it became part of the Constitution.
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Federal income tax
The 16th Amendment to the US Constitution, which established Congress's right to impose a federal income tax, was passed on July 2, 1909, and ratified on February 3, 1913. The text of the amendment reads:
> "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."
Before the 16th Amendment, federal government revenues came mainly from taxes on goods—tariffs on imported products and excise taxes on items like whiskey. The burden of these taxes fell heavily on working Americans, who spent a much higher percentage of their income on goods than the rich. The 16th Amendment shifted the tax burden to the wealthy, at least initially.
The 16th Amendment overruled the Pollock decision, restoring Congress's power to tax incomes without having to determine it based on population. The amendment also eliminated the requirement that income tax, to the extent that it is a direct tax, must be apportioned among the states.
The first income tax was introduced during the Civil War through the Revenue Act of 1861. It levied a flat tax of 3% on annual incomes above $800. This was replaced the following year by the Revenue Act of 1862, which levied a graduated tax of 3-5% on incomes above $600 and specified a termination of income taxation in 1866. Civil War income taxes expired in 1872.
The 16th Amendment was the result of a curious series of events culminating in some political maneuvering. In 1909, progressives in Congress attached a provision for an income tax to a tariff bill. Conservatives, hoping to kill the idea, proposed a constitutional amendment, thinking it would never be ratified by three-fourths of the states. However, the amendment was ratified by one state legislature after another, taking effect on February 25, 1913, with the certification by Secretary of State Philander C. Knox.
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Excise taxes
The US Constitution, in Article I, Section 8, Clause 1 (the "Taxing and Spending Clause"), specifies Congress's power to impose "Taxes, Duties, Imposts and Excises". However, excise taxes are not explicitly mentioned in the US Constitution prior to the 16th Amendment, which was ratified in 1913.
The key purpose of excise taxes on alcohol and tobacco is twofold: to discourage undesirable behaviour, such as youth cigarette purchases, and to generate a modest amount of revenue. While there are several federal excise taxes, those on alcohol, tobacco, and gasoline are the most well-known.
In the early 1900s, prior to the 16th Amendment, federal excise taxes were a primary source of revenue for the government, along with customs duties (tariffs). During this period, excise taxes were also imposed at the state level.
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Taxing Clause
The Taxing and Spending Clause, also known as Article I, Section 8, Clause 1 of the United States Constitution, grants the federal government of the United States its power of taxation. This clause permits Congress to levy taxes for two purposes: to pay off debts and to provide for the defence and general welfare of the United States. The clause states:
> "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States."
The power to tax is shared by the federal government and individual states. This power has been interpreted broadly, but has occasionally been limited by the courts. The Taxing Clause also grants Congress "a substantive power... to appropriate", free from the limitations of Congress's other enumerated powers. This power is considered essential to the effective administration of government.
The Taxing Clause has been used by Congress for purposes other than raising revenue, such as regulatory taxation, prohibitive taxation, and excise taxation. Regulatory taxation involves taxing to regulate commerce, while prohibitive taxation involves taxing to discourage or suppress commerce. Excise taxation is a tax on a specific good or service, typically one considered harmful to society, such as alcohol or tobacco.
The Sixteenth Amendment to the U.S. Constitution, ratified in 1913, further clarified the power of Congress to levy income taxes. The text of the amendment states:
> "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."
The Sixteenth Amendment overruled previous case law prohibiting unapportioned taxes on incomes derived from property. It also overturned the Pollock decision, which had held that income taxes were subject to the rule of apportionment. The amendment's adoption settled the constitutional question of how to tax income and dramatically changed the American way of life.
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Income tax law
The 16th Amendment to the US Constitution, which established Congress's right to impose a federal income tax, was passed on July 2, 1909, and ratified on February 3, 1913. The text of the amendment reads:
> "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."
The 16th Amendment overruled the Pollock decision, restoring Congress's power to tax incomes without needing to determine it based on population. This amendment was the culmination of a series of events, including the financial requirements of the Civil War, which prompted the first American income tax in 1861.
The Revenue Act of 1861 placed a flat 3% tax on all incomes over $800, which was later modified to include a graduated tax of 3-5% on income above $600. This Civil War income tax expired in 1872 but proved to be highly lucrative, with New York, Pennsylvania, and Massachusetts generating about 60% of the total revenue collected.
In 1909, progressives in Congress attached a provision for an income tax to a tariff bill, which was ratified by one state legislature after another, surprising those who believed it would never receive ratification by three-fourths of the states. The 16th Amendment took effect on February 25, 1913, with the certification by Secretary of State Philander C. Knox.
The first income tax law under the 16th Amendment was introduced by Rep. Cordell Hull, who proposed a graduated tax starting with a 1% rate for incomes between $4,000 and $20,000, increasing to a top rate of 3% for those earning $50,000 or more. While less than 1% of Americans initially had to pay the tax due to exemptions and deductions, the fundamental question of how to tax Americans remains relevant today.
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Frequently asked questions
Yes, before 1913, federal government revenues came mainly from taxes on goods—tariffs on imported products and excise taxes on items like whiskey.
The need to finance the Civil War created one of the first versions of a federal income tax in 1862.
The tax rate imposed on individuals was minimal, ranging from 1% to 1.5%.
In 1913, the 16th Amendment to the Constitution was adopted, and Congress levied an income tax on both corporate and individual incomes.
The tax burden shifted to the rich, with less than 1% of Americans paying the tax in its early days due to generous exemptions and deductions.
