without apportionment". ===The Penn Mutual case=== Although the Sixteenth Amendment is often cited as the "source" of the congressional power to tax incomes, at least one court has reiterated the point made in Brushaber and other cases that the Sixteenth Amendment itself did not grant the Congress the power to tax incomes, a power the Congress had since 1789, but only removed the possible requirement that any income tax be apportioned among the states according to their respective populations.
During the War of 1812, Secretary of the Treasury Alexander J.
The Revenue Act of 1861 had introduced the first federal income tax, but that tax was repealed in 1872.
The Congress did introduce an income tax to fund the Civil War through the Revenue Act of 1861.
This act was replaced the following year with the Revenue Act of 1862, which levied a graduated tax of three to five percent on income above $600 and specified a termination of income taxation in 1866.
This act was replaced the following year with the Revenue Act of 1862, which levied a graduated tax of three to five percent on income above $600 and specified a termination of income taxation in 1866.
The Revenue Act of 1861 had introduced the first federal income tax, but that tax was repealed in 1872.
The Civil War income taxes, which expired in 1872, proved to be both highly lucrative and drawing mostly from the more industrialized states, with New York, Pennsylvania, and Massachusetts generating about sixty percent of the total revenue that was collected.
During the two decades following the expiration of the Civil War income tax, the Greenback movement, the Labor Reform Party, the Populist Party, the Democratic Party and many others called for a graduated income tax. The Socialist Labor Party advocated a graduated income tax in 1887.
The Populist Party "demand[ed] a graduated income tax" in its 1892 platform.
The 1894 Wilson–Gorman Tariff Act contained an income tax provision, but the tax was struck down by the Supreme Court in the case of Pollock v.
The Democratic Party, led by William Jennings Bryan, advocated the income tax law passed in 1894, and proposed an income tax in its 1908 platform.
Farmers' Loan & Trust Co., all income taxes had been considered to be indirect taxes imposed without respect to geography, unlike direct taxes, that have to be apportioned among the states according to population. ==The Pollock case== In 1894, an amendment was attached to the Wilson–Gorman Tariff Act that attempted to impose a federal tax of two percent on incomes over $4,000 (equal to $,000 in ).
Supreme Court declared certain taxes on incomes, such as those on property under the 1894 Act, to be unconstitutionally unapportioned direct taxes.
From well before 1894, Democrats, Progressives, Populists and other left-oriented parties argued that tariffs disproportionately affected the poor, interfered with prices, were unpredictable, and were an intrinsically limited source of revenue.
It was passed by Congress in 1909 in response to the 1895 Supreme Court case of Pollock v.
A sharp rise in the cost of living between 1897 and 1913 greatly increased support for the idea of income taxes, including in the urban Northeast.
The Democratic Party, led by William Jennings Bryan, advocated the income tax law passed in 1894, and proposed an income tax in its 1908 platform.
It was passed by Congress in 1909 in response to the 1895 Supreme Court case of Pollock v.
In 1909, during the debate over the Payne–Aldrich Tariff Act, Congress proposed the Sixteenth Amendment to the states.
Few considered attempting to impose an apportioned income tax, since such a tax was widely regarded as unworkable. ==Adoption== On June 16, 1909, President William Howard Taft, in an address to the Sixty-first Congress, proposed a two percent federal income tax on corporations by way of an excise tax and a constitutional amendment to allow the previously enacted income tax. An income tax amendment to the Constitution was first proposed by Senator Norris Brown of Nebraska.
The amendment was proposed as part of the congressional debate over the 1909 Payne–Aldrich Tariff Act; by proposing the amendment, Aldrich hoped to temporarily defuse progressive calls for the imposition of new taxes in the tariff act.
Aldrich and other conservative leaders in Congress largely opposed the actual ratification of the amendment, but they believed that it had little chance of being ratified, as ratification required approval by three quarters of the state legislatures. On July 12, 1909, the resolution proposing the Sixteenth Amendment was passed by the Congress and was submitted to the state legislatures.
He believed this would excessively centralize governmental power and "would make it impossible for the state to keep any property". Between 1909 and 1913, several conditions favored passage of the Sixteenth Amendment.
In 1910, New York Governor Charles Evans Hughes, shortly before becoming a Supreme Court Justice, spoke out against the income tax amendment.
House in 1910 and the party's presidential candidate polling six percent of the popular vote in 1912. Three advocates for a federal income tax ran in the presidential election of 1912.
In 1912, the Democrats won the presidency and control of both houses of Congress.
House in 1910 and the party's presidential candidate polling six percent of the popular vote in 1912. Three advocates for a federal income tax ran in the presidential election of 1912.
The Sixteenth Amendment was ratified by the requisite number of states on February 3, 1913, and effectively overruled the Supreme Court's ruling in Pollock. Prior to the early 20th century, most federal revenue came from tariffs rather than taxes, although Congress had often imposed excise taxes on various goods.
Shortly after the amendment was ratified, Congress imposed a federal income tax with the Revenue Act of 1913.
A sharp rise in the cost of living between 1897 and 1913 greatly increased support for the idea of income taxes, including in the urban Northeast.
He believed this would excessively centralize governmental power and "would make it impossible for the state to keep any property". Between 1909 and 1913, several conditions favored passage of the Sixteenth Amendment.
On February 25, 1913, Secretary of State Philander Knox proclaimed that the amendment had been ratified by three-fourths of the states and so had become part of the Constitution.
The Supreme Court upheld that income tax in the 1916 case of Brushaber v.
In Penn Mutual Indemnity, the United States Tax Court stated: The United States Court of Appeals for the Third Circuit agreed with the Tax Court, stating: ===The Murphy case=== On December 22, 2006, a three-judge panel of the United States Court of Appeals for the District of Columbia Circuit vacated its unanimous decision (of August 2006) in Murphy v.
See also the Penn Mutual case cited above. On April 21, 2008, the U.S.
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