The Sixteenth Amendment and the Birth of the Federal Income Tax

In the spring of 1895, the lawyers who filled the Supreme Court's chamber in the old Senate wing of the Capitol were arguing about two percent. Congress had passed a tax of two percent on incomes above $4,000 a year, a threshold so high that the overwhelming majority of American families would never come near it. It was attached to the Wilson-Gorman Tariff Act of 1894, which Democrats had hoped would lower the tariffs that raised the price of almost everything working people bought. A shareholder named Charles Pollock sued his own bank, the Farmers' Loan and Trust Company, to stop it from paying the tax, a tidy legal device that let the country's wealthiest interests bring the question to court. The lawyer who led the challenge, Joseph Choate, told the justices that the tax was communistic in its purposes and tendencies. The Court agreed with him, narrowly, and it took the country eighteen years and a constitutional amendment to undo that ruling. The story of how it happened is a story about who pays for government, and who gets to decide.

In short: The Supreme Court struck down the 1894 federal income tax in Pollock v. Farmers' Loan & Trust Co. in 1895. Reformers spent the next eighteen years pushing for a constitutional amendment, which conservatives in Congress agreed to send to the states partly because they expected it to fail. It was ratified in February 1913, and the income tax that followed was designed to shift the burden of federal revenue from tariffs that hit everyone toward incomes at the top.

How a country paid its bills before 1913

For most of the nineteenth century, the federal government lived on tariffs, taxes on imported goods, plus excise taxes on things like liquor and tobacco. Tariffs had a particular feature: they were paid in the price of goods, and since a working family spent nearly everything it earned on goods, while a wealthy family saved and invested much of its income, the burden fell hardest on people with the least.

The Civil War broke that pattern for a time. To pay for the Union army, Congress passed the first federal income tax in 1861 and revised it the next year, with rates that rose with income. It raised substantial revenue, and the government even published lists of what prominent people paid. After the war the tax was allowed to lapse in 1872. When a taxpayer challenged the wartime tax, the Supreme Court upheld it in Springer v. United States in 1881, holding that it was not the kind of "direct tax" the Constitution requires to be apportioned among the states by population.

That last phrase is the key to everything that followed. The Constitution, in two places, says direct taxes must be apportioned by population, so that a state with a tenth of the population pays a tenth of the tax. The rule had its roots in the bargains of 1787, including the three-fifths clause. Applied to an income tax, apportionment makes no sense: a poorer state with a large population would have to pay at higher rates than a richer state with fewer people. If an income tax counts as a direct tax, it is effectively impossible.

Pollock and the five-to-four Court

By the 1890s, the politics of taxation had changed. Industrial fortunes had grown enormous, farm prices were collapsing, and the Populist movement's 1892 Omaha Platform called for a graduated income tax. Democrats, joined by Populists, wrote the two percent tax into the 1894 tariff bill.

In Pollock, the Court first heard the case with one justice absent and split evenly on the central question. After a rehearing with the full bench in May 1895, it ruled five to four that a tax on income from property, such as rents, dividends and interest, was a direct tax and had to be apportioned. Because that part could not survive, the Court struck down the whole income tax. Chief Justice Melville Fuller wrote the majority opinion. Justice Stephen Field, in a concurrence, warned that the assault on capital would not stop with this tax and would lead to political contests between rich and poor. Justice John Marshall Harlan, in dissent, said the ruling put the burden of government on the people least able to bear it, while relieving accumulated wealth.

The decision was immediately controversial, in part because it seemed to contradict Springer and a century of understanding. It also sharpened a political argument that the Court had chosen sides. In the 1896 campaign, William Jennings Bryan and the Democratic platform attacked the ruling, and the call for an income tax became a staple of reform politics for the next decade and a half.

The deal conservatives thought they could win

The breakthrough came from an unlikely place. In 1909, Congress was writing a new tariff law, the Payne-Aldrich Tariff. A coalition of Democrats and progressive Republicans in the Senate, including William Borah of Idaho and Albert Cummins of Iowa, pushed to attach an income tax, essentially daring the Supreme Court to strike it down again.

Senate Republican leader Nelson Aldrich of Rhode Island, one of the most powerful defenders of business interests in American history, wanted to avoid that vote. President William Howard Taft, himself a former judge, worried about passing a law designed to provoke the Court. The compromise: Congress would enact a tax on corporate income, framed as an excise tax on the privilege of doing business in corporate form, and it would send to the states a constitutional amendment permitting an income tax without apportionment.

Many conservatives backed the amendment on the theory that it would die in the states. Ratification required three-quarters of the states, and business interests were strong in many legislatures. Congress passed the amendment by large margins in July 1909. The text was a single sentence: 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.

The conservatives misjudged the country. Over the next three and a half years, state after state ratified, including states in the South and West where farmers and small businesses had long resented both tariffs and Eastern money. The progressive wave of those years, which also produced direct election of senators and many state-level reforms, carried the amendment forward. On February 3, 1913, the threshold of three-quarters of the states was reached, and Secretary of State Philander Knox certified the amendment later that month.

What the reformers thought they were building

It helps to look at the first income tax under the amendment, because it shows what its supporters intended. The Revenue Act of 1913, part of the Underwood Tariff that cut tariff rates sharply, set a normal tax of one percent on income above an exemption of $3,000 for a single person and $4,000 for a married couple. Those exemptions were well above what ordinary workers earned, which meant most families paid nothing. A surtax added more on high incomes, rising to a top combined rate of seven percent on income above $500,000.

The man who wrote the income tax sections of that law was Cordell Hull, a congressman from Tennessee who had spent years arguing that tariffs were a tax on consumers and that incomes were a fairer base. Hull later became Franklin Roosevelt's secretary of state and won the Nobel Peace Prize for his role in creating the United Nations, but his first great cause was the one that put the income tax on the books. For Hull and many Southern and Western Democrats, the income tax was about regions as much as classes: the tariff, in their view, moved money from farmers in the South and West to manufacturers in the Northeast.

The same spring that the amendment was certified, a second reform reached the finish line. The Seventeenth Amendment, providing for the direct election of senators, was ratified in April 1913. The two changes came from the same impulse. Reformers believed that state legislatures, which had chosen senators until then, were too easily captured by railroads and other concentrated interests, and that a Senate chosen that way would never tax great wealth.

In other words, the income tax began as a tax on the affluent and the rich. Its supporters had several goals, and it is worth naming them because they still shape the debate.

The first was fairness. Reformers believed that a system built on tariffs and excise taxes took a larger share from the incomes of working families than from the rich, and that a graduated income tax would correct that. The second was independence from the tariff. As long as the government depended on import duties, every tariff debate was also a revenue debate, and protected industries could argue that their tariffs paid the government's bills. An income tax gave Congress a way to lower tariffs without starving the Treasury. The third was concentrated wealth itself. Some reformers believed that great fortunes threatened democracy, and that a progressive tax would slow their growth.

The first world war changed the scale of the tax almost overnight. Wartime revenue acts raised rates steeply, with the top rate reaching 77 percent by 1918. A tax that had begun at single digits had become, in five years, the central pillar of federal finance.

The strongest case against, then and now

Opponents of the income tax were not only defending their own wallets, and their arguments deserve a fair hearing. They worried that a tax that fell on few would be voted by many, so that majorities could raise the burden on a minority without limit. They worried that an income tax required the government to examine private affairs in a way tariffs never had. And they argued that taxing income discouraged the saving and investment that build an economy.

Some of those concerns were borne out in ways reformers did not expect. The income tax did expand the government's knowledge of private finances, and it eventually reached most working households, not just the rich, especially after the Second World War. The complexity of the modern code, with its thousands of deductions and credits, would have astonished the authors of the one-sentence amendment.

But the central fear, that a progressive income tax would be a weapon of the poor against the rich, did not come true in the way opponents predicted. In the century since, the share of national income going to the very top has risen and fallen and risen again, and the tax code has been as often a tool for preserving fortunes as for taxing them. The real history is that income taxation has been whatever Congress chose to make it, which is exactly why the fight over its design never ends.

Why 1913 still matters

There is a direct line from Pollock to arguments happening now. The question of what counts as a tax on income, and what the Constitution allows Congress to tax, returned to the Supreme Court in Moore v. United States in 2024, a case about a one-time tax on certain foreign corporate earnings, which the Court upheld on narrow grounds. Proposals for a federal tax on very large fortunes raise the old direct-tax problem, because a tax on wealth itself, rather than on income, might be treated as a direct tax that must be apportioned.

The tariff thread runs through the present too. In 2025 the second Trump administration imposed sweeping tariffs under the International Emergency Economic Powers Act, and in February 2026, in Learning Resources v. Trump, the Supreme Court held that the law does not authorise the president to impose tariffs. The reformers of 1913 would have recognised the argument underneath: tariffs are a tax, they fall heavily on households through prices, and the power to tax belongs to Congress.

There is also a quieter thread worth noticing. Every few years, someone files a lawsuit or sells a seminar claiming the Sixteenth Amendment was never properly ratified, or that wages are not income. Courts have rejected those arguments again and again, and the IRS penalizes people who rely on them. The amendment is settled law, and anyone tempted by such claims should treat them as the costly mistakes they are.

The deepest lesson of the Sixteenth Amendment is about persistence. Reformers lost in court in 1895 and spent eighteen years building the political majority to change the Constitution itself. They used a deal their opponents expected to win, and they won it because they had organised the country in the meantime. Fairer taxation was not handed down by a court. It was ratified, state by state, by people who had been told it could not be done.

What you can do

Tax fights are decided in Congress, but the information to follow them is close at hand:

• See where the money has gone. The inequality page shows the wealth shares of the top 1 percent and the bottom 50 percent, real wages and the minimum wage over time, the numbers that frame any argument over who should pay more.
• Tell your members what kind of tax code you want. The representatives lookup gives you contact details and recent votes for your representative and senators, so you can ask where they stand on taxing very large incomes and fortunes.
• Follow the votes as the new Congress takes over. The Congress page tracks bills and roll-call votes, including tax legislation, once the new session begins.
• Read more on the debate over taxing the rich. The topic page on inequality and taxing the rich gathers reporting and analysis on wealth taxes, the estate tax, corporate rates and the distributional studies behind them.