The Sixteenth Amendment, ratified in 1913, expanded on Congress’s taxing power. Article I grants Congress authority to collect taxes,1 but requires direct taxes to be imposed proportional to the population of the states.2 The Sixteenth Amendment clarified that Congress has the power to collect an income tax without apportionment among the states, and without regard to population.3 As discussed in the following essays, the Amendment was adopted in response to a Supreme Court decision that invalidated a federal income tax after holding it was a direct tax that was not properly apportioned.4 Accordingly, the Sixteenth Amendment essentially creates an income tax exception to the requirement in Article I that direct taxes must be apportioned based on states’ population.5 This has raised the question—again, discussed in the following essays—of what counts as “income,” and whether any given federal tax extends beyond income.6 The Court has stated the test generally as whether the law taxes payments that qualify as “profits or gains,” 7 although this applies “regardless of whether the particular transaction results in net profit.” 8 The Sixteenth Amendment applies to income derived “from whatever source,” and thus can be subject to a somewhat broad interpretation.9 Nonetheless, the apportionment exception in the Sixteenth Amendment does not extend to taxes on property, as opposed to income derived from property.10

Footnotes

1

U.S. Const. art. I, § 8, cl. 1; see also ArtI.S8.C1.1.1 Overview of Taxing Clause.

2

U.S. Const. art. I, § 2, cl. 3; id. art. I, § 9, cl. 4.

3

U.S. Const. amend. XVI.

4

Amdt16.2 Historical Background on Sixteenth Amendment; see also ArtI.S9.C4.4 Direct Taxes and the Sixteenth Amendment.

5

See, e.g., Eisner v. Macomber, 252 U.S. 189, 206 (1920) (saying the Sixteenth Amendment “did not extend the taxing power to new subjects, but merely removed the necessity which otherwise might exist for an apportionment among the States of taxes laid on income” ).

6

See, e.g., id. (noting that the Amendment should not be extended beyond “income,” in order to fully effectuate the Article I limitation).

7

See, e.g., Edwards v. Cuba R. Co., 268 U.S. 628, 633 (1925). See also Bowers v. Kerbaugh-Empire Co., 271 U.S. 170, 174 (1926) ( “[I]ncome may be defined as gain derived from capital, from labor, or from both combined, including profit gained through sale or conversion of capital.” ).

8

Burnet v. Sanford & Brooks Co., 282 U.S. 359, 364 (1931).

9

U.S. Const. . amend. XVI. The definition of income in early federal tax laws has been interpreted as essentially being tied to the constitutional definition, as the Court said the text indicated “the purpose of Congress to use the full measure of its taxing power.” Helvering v. Clifford, 309 U.S. 331, 334 (1940).

10

See Eisner, 252 U.S. at 207–08.