16. Amendment to the United States Constitution
The 16th Amendment to the Constitution of the United States of America , permitting the collection of income taxes in their current form, was passed on February 3, 1913.
The constitutional amendment says:
"Congress has the right to levy and collect taxes on income from any source without having to apportion it proportionally to individual states or be tied to an estimate or census."
history
The Wilson-Gorman Tariff Act of 1894 attempted to impose a federal income tax of 2% on income over $ 4,000 . Defamed as “communist” by opponents of the law , he was challenged by a federal court.
In the Pollock v. Farmers' Loan & Trust Co. , the Supreme Court ruled in 1895 that the law was unconstitutional. In response to this development and the growing concern of many sections of society that the richest citizens combined too much economic power, this constitutional amendment was passed by Congress and sent to the states. In 1913, Secretary of State Philander Knox declared that the constitutional amendment had been ratified by the necessary three-fourths majority of the states (several other states later ratified the constitutional amendment). That same year, Congress introduced a new general income tax.
Interpretation of the constitutional amendment
The interpretation of the 16th Amendment to the Constitution by the Supreme Court has evolved over time and adapted to the circumstances. Many disputes about the applicability of the constitutional amendment arise from reliance on older formulations and overturned decisions.
Previous decisions
In the case of Brushaber v. Union Pacific Railroad in 1916, the Supreme Court ruled that the amendment prevented the court from removing income tax from indirect taxes and placing it under the direct tax category, as was the case in Pollock v. Farmer's Loan & Trust Co. happened. All direct taxes must be allocated through Article 1 of the American Constitution. The court further ruled that the amendment was not retroactive, stating that taxes on personal property should still be viewed as direct taxes.
In the Bowers case , Collector v. Kerbaugh-Empire Co. of 1926 the judge took a position:
“It was not the intention or the effect of this amendment to introduce an entirely new instrument into tax policy. Congress already had the power to tax all income. But taxes from some sources were considered direct taxes. The amendment provided an exemption from this requirement and removed the distinction between income taxes that were considered direct and those that were not, thus putting all types of income on an equal footing. After full consideration, this court declares that income is defined as earnings from capital, work or a combination of both. "
Modern design
In the court proceedings Commissioner v. Glenshaw Glass Co. of 1955, the Supreme Court clarified what, according to a modern interpretation , is meant by the term income under the 16th Amendment. Income taxes could therefore be levied on things over which the respective taxpayer had control. According to this definition, any increase in wealth, whether through wages, bonus payments, stock sales, or through profits and betting winnings, is included in the definition of income. This will be the case until Congress introduces a special allowance (such as that for gifts, inheritance, grants, and alimony).
Some lower courts have ruled that the amendment encourages the improper collection of direct taxes on income. However, the Supreme Court has always emphasized that all income taxes are considered indirect taxes.
Disputes
Some US citizens who object to income taxes claim that the 16th Amendment was never properly ratified. Appeals addressing the issue of ratification cite factors such as differences in capitalization, different terminology, and the use of different punctuation in the various state bills. Another persistent argument is that Ohio was not yet an American state in 1913 because a Congressional notice indicated that Ohio was not a US state until 1953 (although Ohio had been sending representatives to Congress and voting in presidential elections since 1803 ).
Another argument of the critics is that the 16th Amendment, although it was ratified according to valid procedures, merely suggests the legality of an income tax without explicitly naming it.
The best known proponent of the non-ratification claim is Bill Benson , co-author of The Law That Never Was . His arguments have been used by the defendants in several legal proceedings and have been rejected in each of the cases. In the US v. Thomas wrote the following to the 7th Court of Appeal:
“38 states have ratified the 16th Amendment, 37 of which have sent formal papers to the minister responsible ( Minnesota informed the minister orally). Only 4 papers give the exact wording of the 16th Amendment to the Constitution as passed by Congress. The other states refer to errors in punctuation, the different spelling of technical terms and the different capitalization. The text of the law that Congress has sent to the states reads: Congress should have the right to set and levy taxes on any income without any distribution among the various states and regardless of any census. The Illinois law included the word renumeration in place of the word enumeration (census) ; the legal text of Missouri replaced the word lay by levy . Other states made similar blunders. "
Federal courts have denied appeals based on the non-ratification claim .
