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Amendment XVI (the Sixteenth Amendment) of the United States Constitution, authorizing a graduated income tax, was ratified on February 3, 1913. It states:

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.

Interpretation and history

The Income Tax Act of 1894 attempted to impose a federal tax of 2% on incomes over $4,000. Derided by its opponents as "communistic", it was challenged in federal court. In the case of Pollock v. Farmers' Loan & Trust Co. (1895), the Supreme Court declared it to be an unconstitutional "direct tax", forbidden by Article I of the Constitution unless apportioned by population. (Such apportionment is impractical for income taxes, since the rates would have to be set differently in different states depending on their population and total incomes.) In response, this amendment was passed in order to make federal income taxes constitutional.

But, in Brushaber v. Union Pacific R. Co., (1916), Supreme Court Chief Justice White delivered the opinion of the court:

(a) The Amendment authorizes only a particular character of direct tax without apportionment, and therefore if a tax is levied under its assumed authority which does not partake of the characteristics exacted by the Amendment, it is outside of the Amendment, and is void as a direct tax in the general constitutional sense because not apportioned.

(b) As the Amendment authorizes a tax only upon incomes 'from whatever source derived,' the exclusion from taxation of some income of designated persons and classes is not authorized, and hence the constitutionality of the law must be tested by the general provisions of the Constitution as to taxation, and thus again the tax is void for want of apportionment.

(c) As the right to tax 'incomes from whatever source derived' for which the Amendment provides must be considered as exacting intrinsic uniformity, therefore no tax comes under the authority of the Amendment not conforming to such standard, and hence all the provisions of the assailed statute must once more be tested solely under the general and pre-existing provisions of the Constitution, causing the statute again to be void in the absence of apportionment.

(d) As the power conferred by the Amendment is new and prospective, the attempt in the statute to make its provisions retroactively apply is void because, so far as the retroactive period is concerned, it is governed by the pre-existing constitutional requirement as to apportionment.

Some Americans who object to income taxes claim that the Sixteenth Amendment was never properly ratified. The best-known proponent of this claim is Bill Benson, author of the book The Law That Never Was. However, federal courts have rejected appeals based on these claims, and some now consider them "frivolous" claims that are subject to sanction.

In spite of the questionable ratification of the 16th amendment, the amendment was certified in 1913 making it part of the Constitution. However the amendment failed to repeal the apportionment clause, and in the Supreme Court case Stanton v. Baltic Mining Co., (1916), Chief Justice White delivered the opinion of the court: "But, aside from the obvious error of the proposition, intrinsically considered, it manifestly disregards the fact that by the previous ruling it was settled that the provisions of the 16th Amendment conferred no new power of taxation, but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged, and being placed in the category of direct taxation subject to apportionment by a consideration of the sources from which the income was derived,-that is, by testing the tax not by what it was, a tax on income, but by a mistaken theory deduced from the origin or source of the income taxed."

External links

• National Archives: 16th Amendment
• "The Law That Never Was" — Bill Benson's website disputing its ratification
• Frauds and Scams site describing failure of Benson-inspired arguments in court
• Brushaber Decision Supreme Court opinion on the apportionment clause of the Constitution.
• Stanton Decision no new power of taxation

• U.S. Constitution
• U.S. economic history