Happy B-Day 16th Amendment

On February 25th, 1913 Secretary of State Philander Chase Knox declared the 16th amendment in effect, giving congress the power to levy and collect income taxes. The announcement was a culmination of years of controversy surrounding the issue. Until that point, Article I, Section 8 of the Constitution allowed the federal government to collect an income tax only if it was apportioned according to how many representatives the state had in the House.

The Tariff Act of 1894 also gave congress the power to collect income tax and stated that during a period of five years, any gains from income in excess of $4,000 would incur a 2% income tax, payable directly to the federal government. Massachusetts citizen Charles Pollack took issue with this act, when the Farmers' Loan & Trust, of which he was a shareholder, in compliance with the law, paid the taxes it owed on its profit as well as supplied the names of its shareholders to the Department of Treasury as also liable to pay taxes.

Pollack sued the trust, and after losses in the lower courts, he took his grievance all the way to the high court of the land. In Supreme Court case Pollack v Farmers' Loan & Trust, Pollack argued that since, according to the constitution, any taxes paid directly to the US government must be apportioned by state, imposing taxes on his income from owning shares in Farmers' Loan & Trust without apportionment was unconstitutional. The Supreme Court agreed in a controversial 5-4 decision, and did not require Pollack to pay the taxes.

Not surprisingly this ruling was unpopular with congress. The idea that the Supreme Court could take away its ability to tax its citizens was a frightening one, and in response, the 16th amendment was proposed and ultimately ratified--negating the decision and allowing congress to collect any income tax from any source without state apportionment.

As income tax time approaches, it is a great time to talk to your students about the 16th amendment. A great activity is to have them compare the very first 1040 form introduced in 1913, a copy of which is also on display at the National Constitution Center, to a blank one used today by their parents. Discuss the similarities and differences, and why these may have occurred in an effort to facilitate a dialogue about income taxes, why they exist, and how they support our nation.