Which Amendment Made Income Tax Legal?
The story of income tax in the U.S. is rife with stops, starts, and court battles.
Taxes imposed by Parliament were one of the triggers that set off the American colonies' fight for independence ("No taxation without representation!"). So, the new nation's Constitution stated in the first draft that citizens should not be subject to direct taxation.
Despite this, about 60 years later, the first income tax in the U.S. was levied to pay for the Civil War. When the conflict ended, this tax was repealed, but it gave the federal government a taste for the revenue that income taxes could raise. A new income tax was introduced in 1894, ostensibly to make up for lost revenues from reductions in U.S. tariffs. The public was not impressed. This tax was taken before the Supreme Court and was declared unconstitutional, in the case Pollock v. Farmers' Loan and Trust Co.
- Taxes were one of the reasons for the colonies' fight for independence.
- The first income tax paid for the Civil War.
- The new income tax in 1894 was to make up for lost revenue in tariffs.
Understanding the 16th Amendment
To counteract the defeat, the government drafted the 16th Amendment, which states, "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." The amendment was ratified in 1913, clearing the legal hurdles to an income tax. Unsurprisingly, an income tax was levied that very year. The legislation was again taken up in front of the Supreme Court. On January 24, 1916, the court ruled that income taxes were now legal—due to the constitutional changes.
From that time forward, income tax has become a regular fixture of American life. Long before the permanent imposition of income tax or, worse yet, pay-as-you-go income tax, Benjamin Franklin lamented, "Nothing is certain but death and taxes." Since then, medical advances have made headway on at least delaying death, but we've consistently lost ground on the taxes.
Tax Protestors Dispute the Constitutional Legality of Taxes
Some protestors dispute the constitutional legality of tax payments and the substantial legal penalties that can come from not paying it. Some refuse to pay income tax in protest, claiming that the income tax is unconstitutional and illegal. The IRS has produced a publication, The Truth About Frivolous Tax Arguments, which rebuts some of the most common arguments tax protestors use to claim that paying income tax is illegal, unconstitutional, or voluntary.
Some of these frivolous tax arguments include:
- Taxation is slavery and violates the 13th Amendment. Courts have repeatedly ruled that this is not the case.
- Filing a tax return is optional. This argument is based on the use of the word “voluntary” in the Form 1040 instructions, which some tax protestors take to mean that filing the return is optional. In fact, the use of this word refers to the fact that U.S. taxpayers must file their own returns, rather than having the government do so for them, as is done in some countries.
- Taxation is an unlawful seizure of property, and thus violates the 5th Amendment. The Constitution grants the government the right to levy a tax, and this has been upheld by both Phillips v. Commissioner and Brushaber v. Union Pac RR.
Ultimately, judges look unkindly upon frivolous tax arguments, and those who attempt to use them to get out of paying income tax tend to find themselves serving lengthy prison sentences for tax evasion.