Sixteenth Amendment and Taxation



The one good aspect about hind-sight is that we can look back and see what America was promised, how it was sold, and what promises were kept. It is well established that the Sixteenth Amendment did nothing to affect the taxing authority of Congress. What power they had then — they have now; the nature and limitations on taxing that existed before February 1913 are still valid today. The force and effect of the taxing authority in the lives of American citizens today should not be any different than what was imposed upon generations past, and what was intended by the Constitution.

At what point in time did our government start taxing wages, salaries, or compensations for services, etc.? There is no record that the taxing of the individual’s compensation for labor was done prior to the Sixteenth Amendment. Not until Congress passed the Tariff Act of 1913 (Public Law 16) did the nation see its first Individual Income Tax law.The sources of revenue which adequately supported this country for over 130 years came from duties, imposts, and excise taxes. Mr. Sherman (1798) understood that the revenues for government should come from government’s role in regulating commerce. Only during the crisis of the Civil War did the government resort to direct taxes laid against the property of the people.

“. . . the power to directly tax realty and personalty was not meant for use as an ordinary, every-day power; that the United States was expected to rely for its customary revenues upon duties, imposts, and excises; and that it was meant it should impose direct taxes only in extraordinary emergencies and a sort of denier resort.” Richard Olney, Attorney General; argument for the government before the Supreme Court; Rehearing of the Pollock vs. Farmer’s Loan case, 158 U.S. 601 at page 606

“The founders anticipated that the expenditures of the . . Federal government would be for the most part met by indirect taxes. And in order that the power of direct taxation by the general government should not be exercised, except on necessity.” Chief Justice Fuller, Pollock vs. Farmer’s Loan, 158 U.S. 601 at page 621

In 1894 Congress imposed what was ruled by the Supreme Court a direct tax upon property, and the Court made void the law in a decision delivered in 1895 called the Pollock case. This evidently upset some members of Congress as the Court “slapped” their hands and told them NO direct taxes without apportionment. For the next fourteen years Congress worked on a new amendment to the Constitution that would supposedly make clear the question that Congress could tax “incomes” from property.


On June 17, 1909, Senator Norris Brown of Nebraska submitted to the Senate Resolution S.J. 39. It is interesting to note that the original draft of S.J. 39 is ever-so-slightly different than the final draft of S.J. 40. S.J. (Senate Joint) Resolution read:

“The Congress shall have power to lay and collect direct taxes on income without apportionment among the several States according to population.”

After introducing the resolution to the Senate, the resolution went into the Committee on Finance. Before leaving the Senate, however, Senator McLaurin commented:

“I think if the Senator from Nebraska will change his amendment to the Constitution so as to strike out the words “and direct taxes” in clause 3, section 2 of the Constitution, and also to strike out the words “or other direct” in clause 4 of section 9 of the Constitution, he will accomplish all that his amendment proposes to accomplish and not make a constitutional amendment for the enacting of a single act of legislation.”

To which Senator Brown replied:

“That may be true, . . .: but my purpose is to confine it to income taxes alone, and to forever settle the dispute . . . .” (Congressional Record – Senate, June 17, 1909, page 3377)

On June 28, 1909, Mr Aldrich, from the Committee on Finance, reported back to the Senate on the new Senate Joint Resolution No. 40 which read:

“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.”

On July 9, 1909, the resolution went to the House of Representatives, into the Committee on Ways and Means. It then reported back to the House on July 12, 1909, where it passed without any problem.

The interesting side note on this process is that somewhere in the machinery of the Senate Committee on Finance, the Committee dropped the word “direct” out of the resolution. The sixty-four thousand dollar question is WHY???????

My research has turned up nothing in the way of minutes of the meeting of the Committee on Finance and their deliberations. The only evidence found was in Senator Brown’s remarks that he intended to apply a “direct” tax on incomes only. If this was truly the intent of the original draft, and the Committee on Finance deleted the word — does that mean that the Committee could not go along with Senator Brown? If it was the intent of Congress, in proposing the resolution, it would clear up a lot of confusion as to whether the tax on income was direct or indirect.

Many of the comments made during the interim between the passing of the resolution and ratification of the amendment would indicate that the income tax was understood to be a direct tax. This would agree with the ruling of the Supreme Court in the 1895 Pollock case.

Supreme Court Justice White, on the other hand, states:

“We are of the opinion, …, that the confusion is not inherent, but rather arises from the conclusion that the Sixteenth Amendment provides for a hitherto unknown power of taxation, that is, a power to levy an income tax which although direct should not be subject to the regulation of apportionment applicable to all other direct taxes. …

But it clearly results that the proposition and the contentions under it, if acceded to, would cause one provision of the Constitution to destroy another; that is, they would result in bringing the provisions of the Amendment exempting a direct tax from apportionment into irreconcilable conflict with the general requirement that all direct taxes be apportioned. … This result instead of simplifying the situation and making clear the limitations on the taxing power, which obviously the Amendment must have been intended to accomplish, would create radical and destructive changes in our constitutional system and multiply confusion.

… the contention that the Amendment treats a tax on income as a direct tax although it is relieved from apportionment …, is wholly without foundation …” Brushaber vs. Union Pacific R.R., 240 U.S. 1, 11-20 (1915)

Can it not be more clearly stated? This landmark case was decided just two years after the ratification of the Sixteenth Amendment, and laid the foundation for principles that were to apply to the amendment. Being in close proximity to the event (ratification), I am sure that Chief Justice White and the rest of the Court were in on the discussions which precluded the ratification of Senate Joint Resolution 40.

The question that the Sixteenth Amendment allowed a direct tax upon incomes, as originally proposed by Senator Brown, did not make it through Congress or the ratification process of the States and should never arise again in income tax cases — but it does. The Eighth Circuit Court, in a 1980 case blatantly misquotes Justice White and the Brushaber ruling:

“The purpose of the Sixteenth Amendment was to take it ‘out of the class of excises, duties and imposts and place it in the class of direct taxes.’ Brushaber at page 19” U.S. vs. Francisco, 614 F. 2d 617

The Judge in a Tax Court Case in 1981 states:

“Appellant (claims that). . . the income tax is a direct one that must be apportioned among the several states. . . . This requirement was eliminated by the Sixteenth Amendment.” Lonsdale vs. Commissioner of Internal Revenue, T.C. Memo 1981-122

“. . . the sixteenth amendment was enacted for the express purpose of providing for a direct income tax. . . . The Supreme Court promptly determined in Brushaber v. Union Pacific R.R. Co., . . . that the sixteenth amendment provided the needed constitutional basis for the imposition of a direct non-apportioned income tax.” Parker vs. Commissioner of Internal Revenue, 724 F. 2d 469 (1984)


There was little if any debate in Congress on the resolution which proposed the amendment. Some in the Senate wanted to tack on a provision to change the election of Senators from the State legislatures to popular vote (this proposition was later to be added to the Constitution as Amendment no. 17). The following year the record shows several addresses were directed at the resolution. Some points brought out were:

“I do not consider that the amendment in any degree whatever will enlarge the taxing power of the National Government or will have any effect except to relieve the exercise of that taxing power from the requirement that the tax shall be apportioned among the several States. The effect of the amendment will be, in my view, the same as if it said, ‘The United States may lay a tax on incomes without apportioning the tax, and this shall be applicable whatever the source of the income subject to the tax,’ leaving the question ‘What incomes are subject to national taxation?’ to be determined by the same principles and rules which are now applicable to the determination of that question.”

The purpose of the Amendment was not to change the taxing power of Congress, a power already possessed.

“In dealing with the scope of the taxing power the question has been framed in terms of whether something can be taxed as income under the 16th Amendment. This is an inaccurate formulation of the question and has led to much loose thinking on the subject. The source of the taxing power is not the 16th Amendment; it is Article I, section 8, of the Constitution.” Penn Mutual Indemnity Co. vs. Commissioner, 32 Tax Court 659

“. . . the purpose of the (Sixteenth Amendment) was not to change the existing interpretation except to the extent necessary to accomplish the result intended, that is, the prevention of the resort to the sources from which a taxed income was derived in order to cause a direct tax on the income to be a direct tax on the source itself and thereby to take an income tax out of the class of excises, duties and imposts and place it in the class of direct taxes.” (Brushaber case at page 19)

Personally, I do not understand why the amendment was even necessary. Prior to the Pollock decision, the income tax was sustained as an indirect tax; when the Supreme court in the Pollock case ruled the income tax to be direct, the congressional apple cart got spilt, and only after the Court changed in its composition.

In the preceding quote Justice White notes the purpose of the Sixteenth Amendment as “. . . the prevention of the resort to the sources from which a taxed income was derived in order to cause a direct tax on the income to be a direct tax on the source itself . . .” If I may take the liberty to interpret this judicial language: the amendment prevented the consideration of the source from which an income flowed, thereby removing the reasoning used by the Court in the Pollock case. The amendment separates the source from the income.

The Supreme Court, in the Pollock case, found it unreasonable to separate the source from the income it produced when determining if a tax was direct or indirect in nature.

“. . ., and if the source is not open to inquiry, constitutional safeguards might be easily eluded.

. . ., if the revenue derived from municipal bonds cannot be taxed because the source cannot be, the same rule applies to revenue from any other source not subject to the tax; and the lack of power to levy any but an apportioned tax on real and personal property equally exists as to the revenue therefrom.

The power to tax real and personal property and the income from both, there being an apportionment, is conceded; that such a tax is a direct tax in the meaning of the Constitution has not been, and, in our judgement, cannot be successfully denied. . . .

. . . In these cases our province is to determine whether this income tax on the revenue from property does or does not belong to the class of direct taxes. If it does, it is, being unapportioned, in violation of the Constitution, and we must so declare.” Pollock vs. Farmer’s Loan and Trust, 158 U.S. 601 pages 630 -634

With the wording and adoption of the amendment; “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, . . .” Congress in effect accomplished what Chief Justice eluded to; “. . ., if the source is not open to inquiry, constitutional safeguards might be easily eluded.” The Sixteenth Amendment closed the door so that an “inquiry” could not be made in respect to the source of income.

It appears that Congress and other powerful special interests gave themselves a “constitutional stop sign”, being that now the limitations of the Constitution would not be a barrier to their taxing authority.

The two landmark cases on this controversy, the Pollock case prior to the Sixteenth Amendment, and the Brushaber case after the passing of the amendment are a study in contrasts. The Pollock case went into great detail to explain that the income tax was a direct tax. Twenty years later, under Chief Justice White (who was on the court at the time of the Pollock decision), goes to great lengths to show that the income tax is an indirect tax. Mr. Jeffrey Dickstein has gone to great length to show the ineptness of the courts and how they appear to vacillate with the political climate and pressures. (Judicial Tyranny and Your Income Tax; Custom Prints, P.O. Box 9337, Missoula, Mt. 59807)

The debate in Congress over the Tariff Act of 1913 (after the ratification of the amendment) is enlightening when attempting to determine just what is income and the intent of the revenue laws based upon the authority of Congress to impose them.

The Tariff Act of October 1913 was introduced in the House of Representatives as a Committee of the Whole as H.R. 3321 (April 26, 1913). The main pusher of the House Bill was Rep. Hull of Tennessee. After opening remarks the following interesting principles are alluded to by Rep. Hull:

“During recent generations our high tariff taxes have degenerated into a system of special privilege, such as has never before been revealed in the annals of our fiscal history. It is no longer justified either in law or morals. The public conscience revolts against it and modern civilization turns away from it. This doctrine of taxation, the plain and palpable effect of which requires one citizen to bestow as a gift portions of his hard earnings upon another citizen, has become insupportable here and everywhere, . . .” (page 504)

“. . . , the proposed tax is measured by net profits or gains, and is not imposed upon gross income nor capital nor other property. If a citizen has not been successful in his efforts to accumulate profits he is not required to pay the tax, but if he has prospered he is required to contribute to his Government, not the scriptural tithe, but a small percentage of his net profits.” (page 505)

“The proposed law should be construed as similar laws have been construed by the courts with respect to the application of the tax, and that is that the income in question shall be the measure of the tax and not the specific fund out of which the tax is necessarily payable. . . . Paragraph B (now section 61(a) of the IRC) defines the net income of a taxable individual or person. Income as thus defined does not embrace capital or principal, but only such gains or profits as may be realized from rent, interest, salaries, trade, commerce, or sales of any kind of property, and so forth, or profits or gains derived from any other source.” (page 506) Congressional Record House

After a lengthy question and answer period the House Bill was passed on to the Senate where it was brought to the Committee of a Whole, August 28, 1913. After a lengthy procedural debate the discussion turned to an amendment offered by Senator Crawford of South Dakota (S. Res. 177) to House Bill 3321:

“Resolved, that the Committee on Finance be directed to investigate and ascertain the difference in character between income immediately and directly derived by an individual from the carrying on or exercised by him of his profession, trade, and vocation, and income derived from property or investment of capital . . .” (Page 3837)

In respect to this amendment or resolution, Senator Crawford entered into the record comments by Lloyd George to the English Parliament in 1907:

“Comparing two individuals, one ‘who derives, we will say, 1,000 pounds a year from a perfectly safe investment in the funds perhaps accumulated and left to him by his father, and, on the other hand, a man making the same nominal sum by personal labor in the pursuit of some arduous and perhaps precarious profession, or some form of business,’ to say that those two people are, from the point of view of the state, to be taxed in the same way is, to my mind, flying in the face of justice and common sense. (page 3837)

The dialogue continues on this resolution to the amendment to House Bill 3321 with the emphasis on the law distinguishing between earned and unearned income. The same problem again seems to arise on the wording and understanding of paragraph B. Senator Lodge makes the prophetic statement; “It will be an evil day for us when we enter on confiscation of property under the guise of taxation.” (page 3840) Senator Williams turns the discussion back to the Bill (3841) only to have Senator Sherman alludes back to the amendment saying:

“. . . The earnings of any person from any occupation or profession would, if not spent in like manner, become principal. If by professional effort any person should earn a given sum annually and he spends half of it, he saves the other half. The half so saved in turn becomes principal. That principal is property. The savings from the income by professional effort or by any form of skilled labor or unskilled by hand becomes property. At the end of any given period that saving is a principal, and any income derived from it is an income from property, not an income from the earning capacity or the personal ability of the taxpayer in question. . . .

I believe in the classification that we have to make it is a just classification to distinguish between those who have incomes from fixed investments of property and those who have incomes from earning capacity.” (page 3842-3843)

As the Bill is again read Senator Cummins (Iowa) interjects an important point:

“. . . the authority of the Congress of the United States with regard to this subject is not unlimited. It is not like the power which Great Britain exercises over the subject. It is not like the power which the several States exercise over the subject. It is a power granted in Article (Amendment) 16 of the Constitution, . . .

Our authority is to levy a tax upon incomes. . . . I assume that every lawyer will agree with me that we cannot legislatively interpret the meaning of the word ‘income.’ That is purely a judicial matter.” (page 3843)

The record continues as the Senate discusses the term “net income” and what ought to be or what ought not to be — deductions from “gross income.” (Congressional Record Senate August 28, 1913)

In reading the dialog surrounding the Sixteenth Amendment and the Tariff Act of 1913, I am ever amazed at how often the members of Congress look to other nations as examples of how to structure and administer the taxing policies of this nation. It is impossible to equate the United States with other countries in respect to taxing authority. The fundamental principles underlying the formation of this Nation are diametrically opposed to any other nation.

The United States was founded upon individualism. The individual is the supreme sovereign or the source of all governmental power, if it exists at all, it is to be found in the individual person.

“An act of legislature (for I cannot call it a law) contrary to the great first principles of the social compact, cannot be considered a rightful exercise of legislative authority. The obligation of a law in governments established on express compact, and on republican principles, must be determined by the nature of the power, on which it is founded. A few instances will suffice to explain what I mean. …; a law that destroys, or impairs, the lawful private contracts of citizens; a law that makes a man a judge in his own cause; or a law that takes property from A and gives it to B. It is against all reason and justice, for a people to entrust a legislature with such power; and therefore, it cannot be presumed that they have done it. … To maintain that our Federal, or State, legislature possesses such powers, if they had not been expressly restrained; would in my opinion, be a political heresy, altogether inadmissible in our free republican governments.

… With very few exceptions, the advocates of such laws were stimulated by ambition, or personal resentment, and vindictive malice.” Supreme Court Justice Chase, “Calder vs. Bull,” 3 Dallas 386 at pages 388-389

Many of the courts use section 61(a) of the Internal Revenue Code to base their decision that wages are income. An extensive reading of the record of both the House and Senate shed the best light on this point of confusion. Having read the record, the intent of Congress, and the Sixteenth Amendment, the present application of Section 61(a) of Title 26 (Internal Revenue Code) by the courts is totally void of any factual support. Wages, salaries, compensation for labor are considered a “source” from which income is derived, not the income itself.


If there was ever a case for fraud it is found in the proposal and ratification of the Sixteenth Amendment. The need for the amendment sold to America was a:

1.Preparatory measure, “Whether the power shall be exercised, or when it shall be exercised, or whether it shall be exercised at all, are other questions entirely aside from the question of whether the Government shall be vested or stripped of the power.” (Representative Hull, Tennessee, April 1910; also see the Congressional Record-Senate, August 28, 1913 page 3842)

2. The tax is measured by income (profits or gains) and is not upon principal or property; Yet wages, salaries, compensation for labor are taxed.

3. The tax was to reach the “large” incomes; yet the tax today is mainly on the lower and middle class.

4. The Income Tax was to reduce the federal taxes on consumption that was said to effect the lower class individuals the most. The federal and State excise taxation on consumption has never been higher.

5. The Income Tax was considered to be “the fairest and most equitable tax ever devised.” Yet; “Taxation of incomes invites fraud, deception, and dishonesty. . . . an income tax made a nation of liars, and nothing does more to demoralize and corrupt the people. Practically, it is not an equitable tax on income, but rather a tax on ignorance and honesty.” (The Outlook, Philip S. Post, March 2, 1907,p. 503)

6. Cover the necessary expenses of government. It is a known fact that waste in government is in the hundreds of billions of dollars. Special interests consume a major portion of the annual budget and have nothing to do with the “general welfare” of the nation.

7. The income tax is “cheap” to collect???

8. The rising tide of unrest, discontent and socialism will be successfully met. A progressive income tax is one of the goals of socialism!

Beardsley Ruml, past Chairman of the Federal Reserve Bank of New York, in an article discloses that “Taxes for Revenue Are Obsolete;” What is the income tax really for? To express public policy in the distribution of wealth and of income, as in the case of the progressive income and estate taxes; ….” (reprinted in “American Affairs” January, 1946. Also, “Constitutional Choices,” by Lawrence H. Tribe, Harvard Press, P. 167)

Throughout the history of confrontations between the people and their government, excessive taxation has been at the root. And this ‘income redistribution’ or ‘progressive taxation,’ is one of the basic causation for the rise of (as some call it), the ‘patriot movement’ today because:

“…, the taxing system has been perverted since the Sixteenth Amendment to redistribute property. The adequate defence of the Constitution against the spirit of Socialism ended with the progressive income tax, whose excessive graded taxes often effectually confiscate the wealth of the few for the benefit of the many.” “The Constitution of the United States,” James M. Beck,LL.D., [1924], page 272

“Aside from sending someone to war or to prison, government’s ability to make people involuntarily give over their money is its strongest exercise of authority over private citizens and their institutions.

Indeed, the classical case against democracy has always been a theoretical supposition that, sooner or later, the many would use their democratic control of government to violate the property rights of the few. The mob’s insatiable appetites would be fed by unscrupulous politicians, who would use the tax system to confiscate the incomes and wealth of those who have more.

This has not been the case in America, to put it mildly. On the contrary, during the past fifteen years, the monied interests and allied governing elites have used their political power to accomplish the opposite results; Federal tax burdens we steadily shifted from them to everyone else. Clearly, governing power does not reside with the people.”   William Greider, “Who Will Tell The People,” 1992, Simon & Schuster, p. 79.

It is beyond this one individual’s imagination as to why the legal system continues to evade these issues. We have members in Congress who want to reform the tax structure of this nation by offering a “flat” tax or a “consumption” tax. If we cannot learn from history that it matters not what you call a “tax” . . . The government will find a way to abuse it.

I don’t mean to get to religious at this point, but it has pointed out that . . . “[W]e have learned by sad experience that it is the nature and disposition of almost all men, as soon as they get a little authority, as they suppose, they will immediately begin to exercise unrighteous dominion.” D&C 121:39

“O, what a tangled web we weave, when first we practice to deceive.” Walter Scott


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