Wednesday, October 18, 2023

The Original Understanding of the Sixteenth Amendment

Guest Blogger

Bruce Ackerman

In Moore v. United States, the Court will decide whether the Direct Tax Clauses of the Constitution prohibit Congress from imposing wealth taxes. The case is set for argument on December 5th, and together with Joseph  Fishkin and William Forbath, I have submitted an amicus brief that seeks to establish that the case confronts the originalists on the Court with a crucial test – they can protect the wealthy from taxation only at the price of repudiating the Original Understanding of the Income Tax Amendment. 

Here is a Summary of our Argument. While the brief has been filed on our behalf, it will only be available in the Court’s record on Friday. If anyone would like to read it before then, please send a request to my administrative assistant,, and she will send you a copy.

Summary of the Argument

The petitioners’ argument requires this Court to repudiate the original understanding of the Sixteenth Amendment.[1] The historical sources demonstrate that both the framers and the ratifiers of the Amendment had a clear aim. They were determined to restore the broad congressional power over taxation that the Supreme Court had consistently upheld in an unbroken line of precedents going back to the 1790s—but which had been repudiated by a 5-to-4 majority in a single case in 1895, Pollock v. Farmers’ Loan & Trust Co., 158 U.S. 601 (1895) (Pollock II).[2] Pollock refashioned the Constitution’s “direct tax” clauses into a ban on income taxation—a role these clauses had never before played.  Indeed, only fifteen years earlier, the Court had unanimously upheld an income tax statute of the kind that five Justices rejected in Pollock.

By redefining income taxes as “direct,” the Pollock majority precluded Congress from enacting them at all, since they were not, and could not practically be, apportioned by population. As the Pollock dissenters explained, this meant that the majority was inserting into the Constitution a scheme that would protect the property of some of the wealthiest Americans from any plausible form of taxation.  The Pollock majority was disabling Congress from building a tax system that spread the burdens of taxation fairly across the entire society; one class would be privileged with a Court-made constitutional exemption.

Justice John Marshall Harlan wrote the main Pollock dissent.  In his famous dissent a year later in Plessy v. Ferguson, Harlan would argue that the Constitution “neither knows nor tolerates classes among citizens” but ensures that “[t]he humblest is the peer of the most powerful.” 163 U.S. 537, 559 (1896) (Harlan, J., dissenting). His Pollock dissent likewise argued that it was wrong for the Court to create a special class of privileged people who, alone among Americans, would be constitutionally immune from seeing their fortunes taxed.

The public response to Pollock was shock and outrage at this sudden reversal of century-long Congressional practice and judicial precedent, catalyzing a direct legislative challenge to the decision. In 1898, Congress passed another progressive tax—this time on inheritances, rather than income—and in Knowlton v Moore, 178 U.S. 41 (1900), the Court refused to stand behind Pollock. Instead, it issued a unanimous opinion upholding the inheritance tax, despite the appellants’ compelling argument that Pollock’s rationale applied even more powerfully in Knowlton.

This demonstration of judicial restraint failed to deflect the broad-based popular opposition to Pollock itself—which led a bipartisan supermajority in Congress to frame the Sixteenth Amendment in the specific terms necessary to reverse Pollock and thereby restore the broad power to tax that Pollock had undermined. To that end, the Amendment granted Congress plenary “power to lay and collect taxes on incomes,” rather than specifically authorizing other forms of taxation, whose constitutional legitimacy had not been directly assaulted. U.S. Const., am. XVI. As state legislatures considered the Amendment, the Supreme Court itself reinforced the point. In Flint v. Stone Tracy Co., 220 U.S. 107 (1911), the Court again refused to extend the reasoning of Pollock, unanimously upholding the corporate income tax against constitutional challenge. In doing so, the Justices were reinforcing the argument repeatedly made in the course of the ratification debate in the states, which added the Sixteenth Amendment to the Constitution in 1913. In short, by reversing Pollock, the American People were reaffirming Congress’s plenary power over taxation.

In Congress and in the states, the Sixteenth Amendment’s advocates repeatedly invoked the language of the Pollock dissents to justify their initiative—especially Justice Harlan’s demonstration of the imperative need to restore the long-standing principle under which no class has a special constitutional exemption from tax. During the proposal and ratification of the Amendment, the overriding aim of the American People was to reaffirm an understanding of the Constitution that assigned to the political branches, not the courts, the duty of constructing a broad-based and equitable tax system.  Once the text made it clear that Congress could impose “taxes on incomes, from whatever source derived,” the political branches could once again proceed with this work unfettered by restrictions invented by Supreme Court Justices, as the nation confronted the challenges of the twentieth century.

Given this original understanding, it would be truly unprecedented if this Court nevertheless resurrected the 5-to-4 decision in Pollock. It was one thing for Pollock to repudiate a century of history and tradition. It would be quite another thing for this Court to repudiate the self-conscious decision by the American People to restore Congress’ plenary power of taxation—especially at a time when Congress is struggling to deal with its constitutional responsibility to “raise and collect taxes” in a manner that will fulfill the nation’s fiscal responsibilities in the twenty-first century.

We urge the Court to affirm the decision below.  

[1]  The government’s brief in this case conclusively demonstrates that tax provisions like the one at issue here fall within a long tradition of taxing undistributed earnings, and that the Sixteenth Amendment imposes no realization requirement.  But we think it is important for the Court to understand that the Amendment’s original public meaning cuts squarely against what petitioners are asking the Court to do.  Far from imposing a realization requirement, the Sixteenth Amendment was framed and ratified to put an end to judicial efforts to narrow Congress’ broad constitutional power to tax through misuse of the direct tax clauses—the error of Pollock that petitioners are now urging this Court to repeat.

[2]  This cited decision was issued after rehearing. The original decision is Pollock v. Farmers’ Loan & Trust Co., 157 U.S. 429 (1895) (Pollock I).

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