Sixteenth Amendment
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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. |
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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. |
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