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As millions of Americans scrambled this week to get their taxes filed on time, they probably didn’t spend much time wondering how we got here. But the modern income tax, with the federal government drawing most of its money from payments by citizens, is relatively new.
The American Revolution, of course, began as a tax revolt. So when the Founders were drafting the Constitution, they were careful about assigning the power to tax. They didn’t want states, interests, or industries to use the national legislature to burden other states, interests, or industries unjustly. Therefore, the Constitution creates certain limitations on indirect taxes and direct taxes.
Indirect taxes were on goods including “duties, imports and excises.” They were expected to produce enough revenue to fund the national government’s normal operations. Direct taxes, those imposed directly on individuals, needed to be apportioned, or spread throughout the states based on population. If an income tax is subject to apportionment, a state with one-tenth the national population, for example, has to bear one-tenth the aggregate tax liability, regardless of the state’s financial condition.
Congress did take a stab at an income tax during the Civil War, but that levy ended after the war did. When it tried again to pass a modern-style “progressive” income tax in the 1890s, the Supreme Court struck it down. For almost 20 years it was accepted legal practice that an unapportioned income tax violated the Constitution.
That changed 100 years ago with the ratification of the 16th Amendment: “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 bold change left Washington free to impose an income tax, and the tax burden has only grown in the decades since. Congress’s power to spend has soared to surpass its power to tax. If you’re grinding your teeth about your tax bill, blame the progressives and their slapdash constitutional reform.