The 16th Amendment Began With a Promise That Only the Rich Would Pay

Every great government program begins with a reassurance. Don't worry, it's temporary. Don't worry, it's small. Don't worry, it's only for the other guy. The federal income tax managed to deploy all three in its first decade, and it remains the most successful sales pitch in American political history. The pitch was simple: a modest tax on the very rich. The product delivered was a tax on nearly everyone who works.

This post makes a structured case. First, the definitions and the constitutional problem that made an amendment necessary. Second, what the 1913 tax actually was, with the arithmetic. Third, how the base widened. Fourth, the best argument for the progressive income tax, answered. The thesis is narrow and, I think, unanswerable: the 16th Amendment removed a structural limit on federal taxing power and put nothing in its place, so the promise that only the rich would pay was never a promise the Constitution could keep.

Definitions first

Direct tax. The Constitution distinguishes direct taxes from "Duties, Imposts and Excises." It never defines "direct," which has caused trouble ever since. Everyone at the Founding agreed that a capitation, a head tax, was direct, and most agreed that a tax on land was. The category's outer edge was disputed.

Apportionment. Direct taxes must be divided among the states by population. Two clauses say so. Article I, Section 2, Clause 3:

Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers

And Article I, Section 9, Clause 4:

No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.

Apportionment means that if a state has 5 percent of the national population, it must pay 5 percent of any direct tax, whatever its wealth. For a tax on income, that is nearly unworkable: a poorer state would need much higher rates than a richer one to raise its share. Apportionment was, in effect, a constitutional brake on direct national taxation of the people's property.

Uniformity. Indirect taxes, the "Duties, Imposts and Excises," must instead be "uniform throughout the United States" under Article I, Section 8, Clause 1. That means the same rate everywhere, not the same burden per person.

The constitutional problem, 1796 to 1895

In Hylton v. United States (1796), the Court upheld a federal tax on carriages as an indirect tax, and several Justices suggested in passing that only capitations and land taxes were "direct." Congress imposed an income tax during the Civil War, and the Court upheld it in Springer v. United States (1881). That tax was allowed to lapse in 1872.

In 1894 Congress tried again. The Wilson-Gorman Tariff Act imposed a 2 percent tax on incomes above $4,000. It was challenged immediately, and in Pollock v. Farmers' Loan and Trust Co. (1895) the Court struck it down. Chief Justice Melville Fuller's opinion, on rehearing and by a vote of five to four, held that a tax on the income from property, rents, dividends and interest, was in substance a tax on the property itself, and therefore a direct tax requiring apportionment. Because the income tax could not be severed into valid and invalid parts, the whole thing fell.

Justice Stephen Field, concurring in the first round, wrote a line that reads like a forecast: "The present assault upon capital is but the beginning. It will be but the stepping-stone to others, larger and more sweeping, till our political contests will become a war of the poor against the rich." You need not share Field's alarm to see that he understood what was at stake. The apportionment rule was standing between Congress and a general income tax, and the political movement for one was not going to stop.

The amendment and its ratification

The movement did not stop. In 1909, with progressives in both parties pressing for an income tax, Congress sent a proposed amendment to the states. Its text is a single sentence:

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.

Read it for what it removes. It does not create a taxing power; Congress already had the power to tax. It removes the apportionment requirement for taxes on income, "from whatever source derived," which reverses Pollock's distinction between income from labor and income from property. It sets no rate, no exemption, no limit. It does not say "the wealthy," "large incomes" or anything of the kind.

The amendment was ratified on February 3, 1913, when enough states had approved it, and the Secretary of State certified it later that month. The Supreme Court upheld the resulting tax in Brushaber v. Union Pacific Railroad (1916).

What the 1913 tax actually was

Congress enacted the income tax in the Revenue Act of 1913, signed in October of that year. The structure:

• A normal tax of 1 percent on net income above an exemption of $3,000 for a single person, or $4,000 for a married couple.
• An additional tax, or surtax, starting at 1 percent on income above $20,000 and rising in steps to 6 percent on income above $500,000.
• So the top combined rate was 7 percent.

Now the arithmetic. Take a hypothetical single man in 1913 with a net income of $10,000, a handsome sum at a time when the exemption alone was several times what a typical worker earned in a year.

• Income above the exemption: $10,000 − $3,000 = $7,000.
• Normal tax: 1 percent of $7,000 = $70.
• Surtax: none, because he is below $20,000.
• Total: $70, an effective rate of $70 ÷ $10,000 = 0.7 percent.

The typical wage earner owed nothing at all, because his income fell below the exemption. That is the bargain the country was sold, and it was a truthful description of the 1913 law. The trouble is that the 1913 law was a statute, and statutes change.

How the base widened

World War I

Within five years, the top rate rose from 7 percent to 77 percent, its level in 1918. Exemptions were lowered. The income tax, which had been sold as a small supplement to tariff revenue, became the main source of federal funds, which it has remained.

The 1920s

Under Treasury Secretary Andrew Mellon, rates came down substantially through a series of revenue acts, and the top rate fell to 25 percent. That episode is worth remembering: the income tax can be cut as well as raised, and the economy of the 1920s did not collapse for lack of revenue. A fuller history of top rates is in a century of top income tax rates, from 7 percent in 1913 to the 2018 law.

The Depression and World War II

Rates went back up in the 1930s. The decisive change came with the Second World War. The Revenue Act of 1942 lowered exemptions sharply, and the number of Americans filing returns grew from a few million to tens of millions within a few years. The Current Tax Payment Act of 1943 introduced withholding at the source, so that the tax came out of each paycheck before the worker ever saw the money. The top rate reached 94 percent in 1944.

Withholding deserves its own sentence. It changed the experience of paying taxes from writing a check to never seeing the money at all. A tax you never touch is a tax you feel far less, which makes it far easier to raise. That was one of the most consequential administrative decisions of the twentieth century, and it was adopted as a wartime measure.

So within thirty-one years of a 1 percent tax on the comfortable, the country had a mass tax, collected from the paychecks of ordinary workers, with a top rate of 94 percent. Nothing in the Constitution had changed after 1913. Nothing needed to.

The best argument for the income tax, answered

Here is the case its defenders would make, at its strongest.

The pre-1913 federal government relied heavily on tariffs and excise taxes, which are consumption taxes and fall hardest on working families who spend most of what they earn. An income tax, graduated by ability to pay, was the fairer instrument. The apportionment rule, meanwhile, was a historical accident, tangled up with the Three-Fifths Clause and the politics of 1787, and Pollock was a strained decision that ignored a century of practice. A modern nation fighting world wars needed a broad and elastic revenue source. The 16th Amendment gave it one, by the method the Constitution requires: a supermajority amendment ratified by the states.

All of that has some truth. Here is why it does not answer the thesis.

1. The tariff argument is about which tax, not how much. Swapping a regressive tariff for a progressive income tax would have been a defensible reform. What actually happened was addition: the income tax grew on top of a growing federal budget, and payroll taxes, which are not progressive, were added later. Fairness arguments justify a design. They do not justify an unlimited power.
2. The apportionment rule was a limit, not an accident. Whatever its origins, it worked as a structural restraint. The Founders feared a national government that could reach into every household directly. Hamilton, in Federalist 21, observed that taxes on articles of consumption carry in their own nature a security against excess, because consumption falls when they rise too high. An income tax has no such natural limit. Removing apportionment removed the one constitutional rule that made a general national income tax hard to impose.
3. The amendment's process was legitimate, and so is criticizing its design. Nothing here questions that the 16th Amendment was validly ratified. It was. The point is that ratifying an amendment which grants power without a ceiling, on the strength of a statute that happened to have low rates, is a mistake of design. The people ratified the power. They were told about the rates.
4. "Ability to pay" has no stopping point in the text. A principle that justifies 7 percent justifies 77 percent if Congress thinks the need great enough, and both rates have existed. The question a constitution should answer is not "what rate is fair" but "what rate may Congress impose without asking anyone." The 16th Amendment answers: any rate at all.
5. Withholding proves the point about visibility. A free people should see what it pays. The modern system was designed so that most people do not, and the complexity of the code, a subject taken up in tax complexity is a subsidy for lobbyists, and the code shows how it works, compounds the problem.

The verdict: the progressive income tax can be defended as a policy. The 16th Amendment cannot be defended as a constitutional design, because it handed Congress an unlimited power on the strength of a limited statute.

What the coverage of the time got right, and what it missed

Read accounts of the ratification and you will find the income tax presented as a reform that would make the rich pay their share and lift the burden of tariffs from working families. That story was sincere. Its blind spot was the oldest one in politics: it described the first version of the law as if it were the last.

Modern coverage tends to repeat the pattern in miniature. A new tax on "the wealthy" or "corporations" is reported as falling on them, rarely with a paragraph on what happens to thresholds that are not indexed to inflation, or to the incidence of a corporate tax, as why the corporate income tax is paid by people, and the only question is who explains. The same question that should have been asked in 1913 should be asked of every new tax: what in the law prevents this from spreading?

What a constitutional conservative should want

None of this requires repealing the 16th Amendment tomorrow. It requires seeing it clearly. Several honest responses are available, and conservatives disagree about which is best.

• A constitutional limit on rates. Some have proposed an amendment capping the top income tax rate. It would restore a structural restraint of the kind apportionment once provided.
• A broader, flatter base. A single rate with a large family exemption would make the tax visible and keep every voter interested in its level. Compare the options in A flat tax, a national sales tax and a VAT, compared for one family.
• Replacement. Some prefer repealing the amendment and moving to a national consumption tax. The danger, which honest advocates acknowledge, is ending up with both taxes rather than one.
• Procedural guardrails. The Origination Clause already requires revenue bills to start in the House, closest to the people, as Why Every Tax Bill Must Start in the House, and How the Senate Gets Around It explains. Supermajority requirements for tax increases, which some states use, are another option.

Whatever the remedy, the lesson is the one that should govern any grant of power: write the limit into the Constitution, not into the first statute that uses the power. A promise in a statute is a promise until the next Congress. A promise in the Constitution is a promise until the people change it.

The case in brief

1. The Constitution required direct taxes to be apportioned by population, and Pollock (1895) held that an income tax on property income was a direct tax.
2. The 16th Amendment, ratified February 3, 1913, removed apportionment for taxes on income "from whatever source derived" and set no limit on rates or exemptions.
3. The Revenue Act of 1913 taxed only the comfortable, with a 1 percent normal rate and a 7 percent top rate, but war and withholding turned it into a mass tax within three decades.
4. The policy of progressive taxation can be debated, but the design of the amendment, an unlimited power sold on a limited statute, is the lesson for any future grant of power.

What you can do: look up your own federal effective tax rate on last year's return, then read the text of the 16th Amendment on our Constitution page and ask your representative where the limit on that power is written.