History of the 16th Amendment

A scroll of the 16th amendment

The creation of the 16th Amendment of the U.S. Constitution hails back more than 140 years before it ever appeared before Congress. The concept of instituting a system of taxation was abhorrent to the colonists of the New World. Britain’s insistence of creating a variety of taxes for the colonists was one of the reasons, if not the only one, for the birth of the Revolutionary War.

Stamp Act Congress

Britain proposed the Stamp Act of 1765, in which the colonists in North America were required to pay taxes on paper documents including legal documents, licenses, playing cards, and newspapers. The aim of the British was to use the colonists’ taxes to defray costs they had incurred during the French and Indian War.

In October 1765, representatives of nine colonies met in New York at the Stamp Act Congress where they approved the Declaration of Rights and Grievances. The document declared that “only representatives of the people of these colonies are persons chosen therein, by themselves; and that no taxes ever have been or can be constitutionally imposed on them but by their respective legislatures.” 

Despite the objections of the colonists, the Stamp Act was enacted in November 1765 by the British Parliament. Britain repealed the Act in 1766 but continued to increase taxation of the colonists. The colonists strongly objected to taxation without representation and made their voices heard by throwing tea into Boston Harbor in 1773.

Post-Constitution Law

The U.S. Constitution clearly forbids enacting an income tax, yet there were attempts made by the government to introduce various taxes. The proposals were met with vigorous opposition. In 1794, Alexander Hamilton proposed the idea of taxing producers of whiskey to pay off expenses incurred during the Revolutionary War. President George Washington opposed the idea, but it was passed in Congress. The tax was levied against farmers and settlers west of the Alleghenies in Pennsylvania. Small producers were hit the hardest, with larger whiskey producers receiving tax breaks due to volume. The people declared the tax unfair and discriminatory. The Whiskey Rebellion ensued. Washington sent troops to stop the riots. The tax was repealed, but having citizens pay for government debt had just begun.

While federal income taxation remained unconstitutional, politicians managed to enact the practice for limited time periods, usually around the time of war.

  • In 1798 Congress introduced the Federal Property Tax Act which was designed to pay for the expansion of the Army and Navy in case there was a war with France.
  • In 1812, the first permanent income tax was suggested.
  • The Tax Act of 1861 was produced, stating that “there shall be levied, collected, and paid, upon annual income of every person residing in the U.S. whether derived from any kind of property, or from any professional trade, employment, or vocation carried on in the United States or elsewhere, or from any source whatever.” The Tax Act passed Congress but was never enforced.
  • The Civil War was responsible for bringing taxes to the forefront once again. In 1862, President Abraham Lincoln signed the Tax Act of 1862. The purpose of the act was to collect funds to pay for the Civil War. The Commissioner of Revenue stated, “The people of this country have accepted it with cheerfulness, to meet a temporary exigency, and it has excited no serious complaint in its administration.” Despite the “cheerfulness” of the people, compliance was low. Citizens tolerated the Tax Act designed to pay for the Civil War (1861–65) but were unwilling to continue government support through a federal income tax amendment. The request for money from the people kept coming and the Tax Act was repeatedly modified. It was deemed unconstitutional in 1872.
  • In 1895, the U.S. Supreme Court declared that federal income tax was unconstitutional.

Congress continued to struggle with the “tax dilemma.” Unless income taxes could be apportioned between the states based on their populations, they could not levy income taxes. The Sixteenth Amendment was designed to solve the problem. Congress added specific language designed to circumvent Constitutional law. Adding the phrase, “from whatever source derived,” removes the “direct tax dilemma” which is mentioned in Article I, Section 8. Therefore, the text of the 16th 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.

Kids-laws.com explains the Amendment in detail:

The Congress shall have power to lay and collect taxes on incomes…

(Congress is allowed to collect some of the money earned by people working in the United States)

from whatever source derived…

(it doesn’t matter where the money is earned, as long as it is “income”)

without apportionment among the several States…

(there is no need to share the revenue with the states)

and without regard to any census or enumeration.

(the census, a count of all the people that live in the United States that happens every ten years, can’t be used as a basis for distributing taxes on people)

In 1909 The 16th Amendment to the U.S. Constitution was passed. Citizens were required to pay federal income tax on a permanent basis. The initial tax system was simple and operated on a sliding scale: those with low incomes (below $20,000) would pay 1% tax, and those with the highest income ($500,000+) would pay a 7% tax.

1913: The 16th Amendment to the U.S. Constitution was ratified.

The Modern Tax System

The modern tax system is drastically different than it was in 1913. The once-simple formula is no longer simple, involving deductions, tax shelters, people vs. corporations, and thousands of laws that change annually. The only thing that citizens can be assured of is that the federal income tax amendment is permanent.

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