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Sixteenth Amendment

Sixteenth Amendment

The Sixteenth
Amendment provided for a uniform law regarding the collection of income tax on
the national level. The introduction and passage of the Sixteenth Amendment
would prove to be a crucial one, impacting the financial growth and economic
standing of the United States.

The main
concept of the Sixteenth Amendment is that under the new legislation, Congress
would not need to apportion an income tax among the states or have it based
upon the numbers produced by the Census. The Sixteenth Amendment would revise
the previous Constitutional provisions regarding direct taxes and except income
taxes on rent, interest, and dividends from those requirements as a result of
 Pollock v. Farmers’ Loan &
Trust Co.
 in 1895. The Sixteenth Amendment would be ratified on February
3rd, 1913.

The Sixteenth 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 new legislation created for Congress’s
right to impose a Federal income tax, which was the subject of much change, and
at times, confusion prior to the ratification of the Sixteenth Amendment.

The first
income tax was imposed as a result of the Civil War, which was introduced in
1861. It consisted of a three-percent flat tax on incomes greater than $800.
This would be changed a year later to introduce a graduated tax ranging from
three to five percent on incomes over $600. All income taxes were considered to
be indirect taxes and were imposed according to geographic uniformity. Direct
taxes all were required to be apportioned according to the population of the

Prior to the
Sixteenth Amendment, the income tax system was an issue of dispute between
farmers and those involved in industrial professions. The argument was that the
low prices set upon for their farm products and the requirement to pay high
prices for manufactured goods and products was unfair. Many farmers would form
coalitions and organizations to introduce their tax platforms, consisting of a
graduated income.

The Pollock v. Farmers’ Loan & Trust Co. Case
would declare that some income taxes were unconstitutional because they were
not apportioned direct taxes. The case would determine that the source of
income would be used in order to classify whether the income was direct or
indirect, thus allowing for the definition of what kind of income tax would be
levied. Income taxes on wages were not to be apportioned by the population
numbers, while those on interests, dividends and rent were.

This created
a growing dispute prior to the case regarding the sentiment of the Government
protecting industrial and financial markets by protecting the economic elite
created by Industrialization. The Sixteenth Amendment would finally address and
solve the dispute as to how income was to be taxed and under what
determinations such income tax is to be considered to be properly be enacted
and enforced.