Sixteenth Amendment

Before February 3, 1913, the federal government funded itself almost entirely through tariffs and excise taxes — consumption taxes that fell proportionally harder on those with less to spend. The Sixteenth Amendment changed that by granting Congress the explicit power to levy a tax on income from whatever source derived, without apportionment among the states. The first income tax under the new authority applied to roughly 3 percent of Americans — those earning more than $3,000 a year — at rates ranging from 1 to 7 percent. The top rate today is 37 percent. The amendment is the financial foundation of the modern federal government.

The path to ratification took nearly a quarter century. A federal income tax had been enacted during the Civil War as an emergency measure, then allowed to lapse. A peacetime income tax passed in 1894 was struck down by the Supreme Court the following year in Pollock v. Farmers' Loan & Trust Co., which held that a tax on income from property was a direct tax requiring apportionment by state population — making it functionally unworkable. The Progressive movement, energized by evidence of extreme wealth concentration in the Gilded Age, pushed the constitutional amendment route as the only path around Pollock.

William Howard Taft, not generally remembered as a progressive president, proposed the amendment to Congress in 1909, calculating that the ratification process would take long enough to forestall immediate legislation — he was wrong. It was ratified in 1913 during Woodrow Wilson's first year in office. The amendment fundamentally shifted how Americans thought about the relationship between wealth and civic obligation, and made possible the New Deal, World War II mobilization, the interstate highway system, and virtually every major federal program since.