Understanding Taxation

Understanding Taxation

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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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