Many people ask why, if the 16th Amendment created no new taxing power, as stated by the Supreme Court in Brushaber v. Union Pacific Railroad Co., 240 U.S. 1 (1916), it is necessary to litigate whether the 16th Amendment was ratified?
The Supreme Court ruled in Pollock v. Farmer’s Loan & Trust Co., 157 U.S. 429, aff. reh., 158 U.S. 601 (1895), that the income tax enacted by Congress in 1894 was a direct tax, the act passed by congress wasn’t apportioned, and therefore the tax was unconstitutional.
The decision wasn’t unanimous. The court was split five to four. Those in the minority believed a tax on income was not a direct tax, but an indirect, excise tax. One of the dissenters was associate justice White.
Notwithstanding the decision was split five to four, the result was that the constitutional requirement that direct taxes be apportioned was upheld. To overcome the holding of Pollock, Congress proposed the 16th Amendment. It was allegedly ratified in 1913.
Subsequent to the alleged ratification of the 16th Amendment, the Supreme Court does not agree on exactly what the 16th Amendment did:
- According to the Supreme Court in Eisner v. Macomber, 252 U.S. 189 (1920), the 16th Amendment removed the requirement of apportionment for the direct income tax. That is, direct taxes still had to be apportioned except the direct tax on income.
- According to Brushaber, written by Justice White who by that time had become the chief justice, the 16th Amendment prevented courts from doing what he claimed the Pollock court did—consider the source of the income to take the tax on that income out of the class of excises, to which he claimed it belonged, and placing it in the class of direct taxes. That is, a tax on income, regardless of the source, is an indirect tax; because the tax is not a direct tax, it does not have to be apportioned.
Whether you agree with Brushaber that the tax is an excise tax that doesn’t have to be apportioned, or agree with Eisner that the tax is a direct tax that doesn’t have to be apportioned, without the 16th Amendment, the law reverts back to Pollock, and may not be enforced by the IRS.
The 16th Amendment Bill Benson litigation may be monitored at http://jeffdickstein.com.5 years ago • 35 notes