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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.

In Brushaber v. Union Pacific R. Co., (1916), the Supreme Court ruled that the amendment created a narrow exception, into which only taxes on income from all sources could fit. All other taxes must still pass the "direct taxes must be apportioned" test of Article I. It also ruled that the Amendment was not retroactive.

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. In spite of the questionable ratification of the 16th amendment, the amendment was certified in 1913 making it part of the Constitution. Federal courts have rejected appeals based on these claims, and some now consider them "frivolous" claims that are subject to sanction.

Some analysts mistakenly think that the 16th amendment created the income tax, or that it created an exception to the apportionment rule for direct taxes. There is no question that the Internal Revenue Commissioner's agents, the IRS, collects taxes directly from the people, and since income is personal property, such a collection appears to be a direct taxation. Regardless of appearances, such analysts are wrong.

The 16th amendment did not confer any new power of taxation. Article 1 Section 8 specifically grants Congress the power to tax the people, and an income tax falls within that power.

The 16th amendment did not create an exception to the apportionment rule for direct taxes. Instead, by declaring that the income tax does not follow the rule of apportionment prescribed in Article 1 Section 3, it categorically classified income tax as an "indirect" tax. Since a tax on one's person, money, income, or property is, by definition, a direct tax, an indirect tax (such as an impost, duty, excise, or tariff) must therefore be a tax on an activity, event, happening, or occurrence.

The income itself is not the subject of the income tax (or the tax on income). It is merely the means of measuring the amount of tax owed.

The question all citizens should ask (and demand answers of their legislators) is: what is the subject of the income tax? The tax code (Title 26 USC) stipulates only the manufacture or import of alcohol, tobacco, or firearms, as activities that are taxable for revenue purposes. Why, then, do so many Americans think they magically "owe" a tax on wages?

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