How Does the 16th Amendment Affect Us Today?

The 16th Amendment gives the federal government the right to collect income tax. Prior to the ratification of this amendment, the U.S. Supreme Court found a federal income tax unconstitutional in Pollock v. Farmer’s Loan & Trust Co. Before the 16th Amendment, the Constitution only allowed Congress to levy taxes against states and not individuals.

Even though the Constitution did not allow Congress to levy income taxes, a bill passed during the Civil War charging citizens a 3 percent tax on income over $800. Revisions to the law eventually resulted in a tax on income over $600, but such taxes ended in 1866. In 1894, Congress imposed a 2 percent tax on income over $4,000, which led to the Supreme Court case and a five-to-four decision striking down the law.

At the beginning of the 20th century, there was a move to tax corporations by President Taft. Congress responded by drafting the 16th Amendment, believing it would not pass. However, the tax was popular in the western states and a sufficient number of states ratified the amendment so that it became law in 1913. The tax laws were generous, and less than 1 percent of the population paid income tax at a rate of 1 percent of their income.