Sixteenth Amendment

AAA

DEFINITION of 'Sixteenth Amendment'

The amendment within the Constitution that gives Congress the power to collect taxes on income without apportioning it among the states. The Sixteenth Amendment was passed in 1909 and ratified in 1913. Before the ratification of the amendment, Congress had passed The Income Tax Act of 1894 that tried to establish a 2% income tax on anyone earning over $4,000 in income. The Tax Act was challenged and taken to the U.S. Supreme Court where it was deemed unconstitutional, which is why the government had to pass the amendment.

INVESTOPEDIA EXPLAINS 'Sixteenth Amendment'

Prior to the Income Tax Act of 1894, an income tax was implemented as part of the Revenue Act of 1861 to finance the Civil War. The income tax was eventually terminated after the war, as the U.S. no longer needed as much money.

RELATED TERMS
  1. State Income Tax

    Tax levied on income at the state level. State income taxes have ...
  2. Income Tax

    A tax that governments impose on financial income generated by ...
  3. Tax Return

    1. The tax form or forms used to file income taxes with the Internal ...
  4. Income Tax Payable

    A type of account in the current liabilities section of a company's ...
  5. Federal Income Tax

    A tax levied by the United States Internal Revenue Service (IRS) ...
  6. Working Tax Credit (WTC)

    A tax credit offered to low-income individuals working in the ...
Related Articles
  1. Tax Tips For The Individual Investor
    Retirement

    Tax Tips For The Individual Investor

  2. Do Tax Cuts Stimulate The Economy?
    Taxes

    Do Tax Cuts Stimulate The Economy?

  3. Financial History: The Rise Of Modern ...
    Professionals

    Financial History: The Rise Of Modern ...

  4. The Government And Risk: A Love-Hate ...
    Insurance

    The Government And Risk: A Love-Hate ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center