[{"command":"add_css","data":[{"rel":"stylesheet","media":"all","href":"\/sites\/default\/files\/css\/css_veuEhhb1658wti0_ZAig66JOyixENU-N9zhjLQSLfOQ.css?delta=0\u0026language=en\u0026theme=heritage_theme\u0026include=eJwrTi1LzdNPzkksLq7Uy8tPSQUAPMsGtA"}]},{"command":"invoke","selector":null,"method":"openEssay","args":["10000176","\n\n\u003Carticle about=\u0022\/constitution\/amendments\/16\/essays\/177\/income-tax\u0022 class=\u0022node node--type-constitution-essay node--promoted node--view-mode-embedded clearfix\u0022\u003E\n  \u003Ch1 class=\u0022title\u0022\u003E\u003Cspan\u003EIncome Tax\u003C\/span\u003E\n\u003C\/h1\u003E\n\n      \u003Cdiv class=\u0022con-location\u0022\u003E\n      Amendment XVI\n    \u003C\/div\u003E\n    \u003Cdiv class=\u0022con-essay-context\u0022\u003E\n      \n            \u003Cdiv\u003E\u003Cp\u003EThe 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.\u003C\/p\u003E\n\u003C\/div\u003E\n      \n    \u003C\/div\u003E\n      \n  \u003Cdiv class=\u0022con-essay-body\u0022\u003E\n    \n            \u003Cdiv\u003E\u003Cp\u003EThe Sixteenth Amendment, approved by Congress in 1909 and ratified in 1913, made it possible for Congress to enact an income tax without having to worry about whether, under the rules applicable to direct taxes, the tax had to be apportioned among the states on the basis of population.\u003C\/p\u003E\n\n\u003Cp\u003ECongress has the \u201cpower to lay and collect taxes,\u201d including an income tax, but, under two constitutional provisions (Article I, Section 2, Clause 3; Article I, Section 9, Clause 4), direct taxes must be apportioned\u2014a difficult requirement to satisfy. If an income tax were subject to apportionment, a state with one-tenth of the nation\u2019s population, for example, would have to bear one-tenth of the aggregate tax liability, regardless of the state\u2019s financial condition. Suppose the populations of Iowa and Maine were equal, but Iowa\u2019s per capita income were twice that of Maine. The rates for an apportioned income tax would have to be twice as high in Maine, the poorer state, as in Iowa. Such geographic variability would make it difficult, if not impossible, for anyone in Congress to support that kind of tax.\u003C\/p\u003E\n\n\u003Cp\u003ENational real estate taxes were enacted in antebellum America, with complex rules for apportionment\u2014the Founders intended direct taxes to be difficult, not impossible\u2014but, at the Founding, no one was thinking about an income tax. When this idea emerged and became politically possible, an income tax was assumed to be indirect, largely because justices in\u003Cem\u003E Hylton v. United States\u003C\/em\u003E (1796) had intimated, in dicta, that the term \u201cdirect taxes\u201d was limited to capitation and real estate taxes. Congress accordingly enacted an unapportioned income tax during the Civil War, and the Court, citing \u003Cem\u003EHylton\u003C\/em\u003E, upheld the tax in 1881. \u003Cem\u003ESpringer v. United States \u003C\/em\u003E(1881).\u003C\/p\u003E\n\n\u003Cp\u003EIn 1894, with little attention to constitutional issues, Congress again enacted an unapportioned income tax with the clear goal of shifting the tax burden from regressive tariffs and excises to a levy based on ability of the individual to pay. Congressional debates were full of statements about how the well-to-do had not been paying their fair share. The sponsors of the income tax intended to accomplish what consumption taxes had not, and, to that end, the 1894 tax reached only the wealthiest 1 percent of the population.\u003C\/p\u003E\n\n\u003Cp\u003EThis time the Supreme Court refused to approve the idea. In \u003Cem\u003EPollock v. Farmers\u2019 Loan \u0026amp; Trust Co.\u003C\/em\u003E (1895), a closely divided Court reinvigorated the direct-tax clauses, holding that the 1894 tax was direct and, because not apportioned, unconstitutional. With \u003Cem\u003EPollock\u003C\/em\u003E on the books, something had to be done if there was to be an unapportioned income tax.\u003C\/p\u003E\n\n\u003Cp\u003ENot every income tax proponent thought a constitutional amendment was necessary after Pollock. Many believed the decision was so clearly wrong that the Court would decide differently if given another chance. In addition, supporters feared that if a campaign to amend the Constitution failed, the income tax would be doomed for years. In fact, some Congressmen \u201cbacked\u201d the amendment precisely because they expected it to die in state legislatures.\u003C\/p\u003E\n\n\u003Cp\u003EWhether \u003Cem\u003EPollock \u003C\/em\u003Ewas wrongly decided was, however, almost beside the point. Enacting a new tax to challenge a recent Supreme Court decision was politically risky. Even if wrong, the Court might not change its mind, particularly if Congress seemed to be questioning judicial authority. By 1909, it had become apparent there would be no income tax until the apportionment issue had been resolved.\u003C\/p\u003E\n\n\u003Cp\u003EThe Sixteenth Amendment did that for \u201ctaxes on incomes.\u201d By its terms, it exempted only such taxes from apportionment, leaving apportionment to apply to other direct taxes (including capitation and real estate taxes, and, given \u003Cem\u003EPollock\u2019s\u003C\/em\u003E expanded conception of direct taxation, maybe more, like a direct consumption tax). The sponsor, Senator Norris Brown of Nebraska, said he intended to limit the amendment\u2019s application in this way, to make an unapportioned income tax possible, and he rejected changes that would have eliminated the direct-tax clauses.\u003C\/p\u003E\n\n\u003Cp\u003EDespite heated opposition, the amendment passed Congress with huge majorities. During ratification, Governor Charles Evans Hughes of New York raised a concern that the phrase \u201cfrom whatever source derived\u201d could be interpreted to permit national taxation of state and local bond interest, something the Pollock Court had said was inconsistent with intergovernmental immunity. Assured that the amendment was not intended to overturn that doctrine, New York signed on and ratification proceeded swiftly.\u003C\/p\u003E\n\n\u003Cp\u003EFacilitating an unapportioned income tax was hardly trivial, but some say the amendment did even more. Bruce Ackerman, for example, argues it was intended to repudiate all of \u003Cem\u003EPollock\u003C\/em\u003E, to contract the notion of \u201cdirect taxes,\u201d and to revive the plenary taxing power. That interpretation gives more weight to the amendment than the \u201ctaxes on incomes\u201d language comfortably bears, however, and it relies on the questionable assumption, derived from \u003Cem\u003EHylton\u003C\/em\u003E dicta, that modern forms of taxation are immune from limitation simply because the Court did not mention them in 1796.\u003C\/p\u003E\n\n\u003Cp\u003EExcept in tax protester cases, where ineffectual arguments about the amendment\u2019s legitimacy are made, the amendment is generally not involved in litigation today. The Supreme Court has had no recent occasion to articulate the meaning of the amendment or to consider whether the amendment, which broadened congressional power, also contains restrictions on that power.\u003C\/p\u003E\n\n\u003Cp\u003EThe general understanding among contemporary scholars is that the taxing power is so broad that Congress alone determines what can be reached by an income tax. This view of unbounded congressional power conflicts with the original, limited role of the amendment, however, and it requires rejecting several old Supreme Court decisions that took the language of the amendment seriously: for an unapportioned tax to be authorized by the Sixteenth Amendment, it must be on \u201cincomes.\u201d\u003C\/p\u003E\n\n\u003Cp\u003EIn \u003Cem\u003EEisner v. Macomber\u003C\/em\u003E (1920), for example, the Court struck down an income tax as it applied to a stock dividend (a distribution not of money, but of additional shares), the receipt of which, said the Court, was not income. Even if the Court misunderstood stock dividends, as some have argued, the case remains significant for what it says about how the amendment should be interpreted. Throughout the 1920s, the Court assumed the term \u201cincomes\u201d had content, stressing that Congress could not circumvent apportionment by simply labeling a levy an income tax. These cases have not been over-ruled, and the Court has cited \u003Cem\u003EMacomber\u003C\/em\u003E favorably, on nonconstitutional matters, as recently as 1991.\u003C\/p\u003E\n\n\u003Cp\u003EIn one respect, the Court has revised the understanding of 1913. Although Congress, by statute, continues not to tax most interest on state and local bonds, the doctrine of intergovernmental immunity advanced by Governor Hughes has been discarded in this context (although not because of the Sixteenth Amendment). \u003Cem\u003ESee South Carolina v. Baker\u003C\/em\u003E (1988) (state bond interest is not immune from nondiscriminatory federal tax; \u003Cem\u003EPollock v. Farmers\u2019 Loan \u0026amp; Trust Co.\u003C\/em\u003E overruled). Thus, interest on state and local bonds is no longer constitutionally exempt from income taxation.\u003C\/p\u003E\n\n\u003Cp\u003EThe Supreme Court has not considered the meaning of \u201cincomes\u201d for decades, but a panel of the U.S. Court of Appeals for the District of Columbia Circuit did just that in 2006, probably to its regret. In \u003Cem\u003EMurphy v. Internal Revenue Service\u003C\/em\u003E (2006), the panel initially concluded that a whistle-blower\u2019s recovery, received because she had been wrongfully discharged from her governmental position and had suffered emotional distress, was not income within the meaning of the Sixteenth Amendment (a conclusion that baffled commentators but was defensible in terms of 1913 understandings), and that a tax on the recovery was a direct tax not protected from apportionment by the Amendment. In the face of intense criticism, the panel subsequently vacated that decision and, in 2007, concluded that, given the Supreme Court\u2019s cramped conception of direct taxation the tax on the recovery was not direct to begin with. That conclusion rendered the Sixteenth Amendment issue irrelevant. The Supreme Court did not grant certiorari, and, as a result, we are left with no guidance from \u003Cem\u003EMurphy\u003C\/em\u003E on the meaning of \u201cincome.\u201d\u003C\/p\u003E\n\u003C\/div\u003E\n      \n  \u003C\/div\u003E\n\n      \u003Cdiv class=\u0022con-essay-author\u0022\u003E\n      \u003Cdiv class=\u0022con-essay-author--media\u0022\u003E\n            \u003C\/div\u003E\n      \u003Cdiv class=\u0022con-essay-author--info\u0022\u003E\n              \u003Ch4 class=\u0022con-essay-author--name\u0022\u003E\n                      \u003Ca href=\u0022http:\/\/law.case.edu\/OurSchool\/FacultyStaff\/MeetOurFaculty\/FacultyDetail.aspx?id=118\u0022\u003EErik M. Jensen\u003C\/a\u003E\n                  \u003C\/h4\u003E\n                  \u003Cdiv class=\u0022con-essay-author--job\u0022\u003E\n         Schott-van den Eynden Professor, Case Western Reserve University Law School\n      \u003C\/div\u003E\n            \u003C\/div\u003E\n    \u003C\/div\u003E\n\n    \u003Cdiv class=\u0022con-essay-tabs\u0022\u003E\n      \u003Cul data-tabs class=\u0022tabs\u0022\u003E\n        \u003Cli class=\u0022button-more thirds\u0022\u003E\u003Ca data-tab href=\u0022#node-10000176-taba\u0022\u003EFurther Reading\u003C\/a\u003E\u003C\/li\u003E\n        \u003Cli class=\u0022button-more thirds\u0022\u003E\u003Ca data-tab href=\u0022#node-10000176-tabb\u0022\u003ECase Law\u003C\/a\u003E\u003C\/li\u003E\n        \u003Cli class=\u0022button-more thirds\u0022\u003E\u003Ca data-tab href=\u0022#node-10000176-tabc\u0022\u003ERelated Essays\u003C\/a\u003E\u003C\/li\u003E\n      \u003C\/ul\u003E\n\n      \u003Cdiv data-tabs-content\u003E\n        \u003Cdiv data-tabs-pane class=\u0022tabs-pane\u0022 id=\u0022node-10000176-taba\u0022\u003E\n          \n      \u003Cdiv\u003E\n              \u003Cdiv\u003E\u003Cp\u003EBruce Ackerman, Taxation and the Constitution, 99 COLUM. L. REV. 1 (1999)\u003C\/p\u003E\n\u003C\/div\u003E\n              \u003Cdiv\u003E\u003Cp\u003EErik M. Jensen, The Apportionment of \u201cDirect Taxes\u201d: Are Consumption Taxes Constitutional?, 97 COLUM. L. REV. 2334 (1997)\u003C\/p\u003E\n\u003C\/div\u003E\n              \u003Cdiv\u003E\u003Cp\u003EErik M. Jensen, The Taxing Power, the Sixteenth Amendment, and the Meaning of \u201cIncomes,\u201d 33 ARIZ. ST. L.J. 1057 (2001)\u003C\/p\u003E\n\u003C\/div\u003E\n              \u003Cdiv\u003E\u003Cp\u003EErik M. Jensen, Murphy v. Internal Revenue Service, the Meaning of \u201cIncome,\u201d and Sky-Is-Falling Tax Commentary, 60 CASE. W. RES. L. REV. 751 (2010)\u003C\/p\u003E\n\u003C\/div\u003E\n              \u003Cdiv\u003E\u003Cp\u003EMarjorie E. Kornhauser, The Morality of Money: American Attitudes Toward Wealth and the Income Tax, 70 IND. L.J. 119 (1994)\u003C\/p\u003E\n\u003C\/div\u003E\n              \u003Cdiv\u003E\u003Cp\u003EEDWIN R. A. SELIGMAN, THE INCOME TAX (1914)\u003C\/p\u003E\n\u003C\/div\u003E\n          \u003C\/div\u003E\n  \n        \u003C\/div\u003E\n        \u003Cdiv data-tabs-pane class=\u0022tabs-pane\u0022 id=\u0022node-10000176-tabb\u0022\u003E\n          \n      \u003Cdiv\u003E\n              \u003Cdiv\u003E\u003Cp\u003EHylton v. United States, 3 U.S. (3 Dall.) 171 (1796)\u003C\/p\u003E\n\u003C\/div\u003E\n              \u003Cdiv\u003E\u003Cp\u003ESpringer v. United States, 102 U.S. 586 (1881)\u003C\/p\u003E\n\u003C\/div\u003E\n              \u003Cdiv\u003E\u003Cp\u003EPollock v. Farmers\u2019 Loan \u0026amp; Trust Co., 157 U.S. 429\u003C\/p\u003E\n\n\u003Cp\u003E(1894), att\u2019d on reh\u2019g, 158 U.S. 601 (1895)\u003C\/p\u003E\n\u003C\/div\u003E\n              \u003Cdiv\u003E\u003Cp\u003EEisner v. Macomber, 252 U.S. 189 (1920)\u003C\/p\u003E\n\u003C\/div\u003E\n              \u003Cdiv\u003E\u003Cp\u003ESouth Carolina v. Baker, 485 U.S. 505 (1988)\u003C\/p\u003E\n\u003C\/div\u003E\n              \u003Cdiv\u003E\u003Cp\u003EMurphy v. Internal Revenue Service, 460 F.3d 79 (D.C. Cir. 2006), vacated (2006); opinion on reh\u2019g: 493 F.3d 170 (D.C. Cir. 2007), cert. denied, 553 U.S. 1004 (2008)\u003Cbr\u003E\n\u0026nbsp;\u003C\/p\u003E\n\u003C\/div\u003E\n          \u003C\/div\u003E\n  \n        \u003C\/div\u003E\n        \u003Cdiv data-tabs-pane class=\u0022tabs-pane\u0022 id=\u0022node-10000176-tabc\u0022\u003E\n                      \u003Ca href=\u0022\/essay_controller\/10000005\u0022 class=\u0022use-ajax\u0022\u003EThree-fifths Clause\u003C\/a\u003E\n                      \u003Ca href=\u0022\/essay_controller\/17848985\u0022 class=\u0022use-ajax\u0022\u003ETaxation\u003C\/a\u003E\n                      \u003Ca href=\u0022\/essay_controller\/10000033\u0022 class=\u0022use-ajax\u0022\u003ESpending Clause\u003C\/a\u003E\n                      \u003Ca href=\u0022\/essay_controller\/10000034\u0022 class=\u0022use-ajax\u0022\u003EUniformity Clause\u003C\/a\u003E\n                      \u003Ca href=\u0022\/essay_controller\/10000063\u0022 class=\u0022use-ajax\u0022\u003EDirect Taxes\u003C\/a\u003E\n                  \u003C\/div\u003E\n      \u003C\/div\u003E\n    \u003C\/div\u003E\n  \n\u003C\/article\u003E\n"]}]