In 1895, the Supreme Court ruled the income tax unconstitutional. Dissenting justice John Harlan said that there would have to be a constitutional amendment for the existence of a federal income tax. Fourteen years later, Congress passed such an amendment. This amendment now faced the daunting task of getting approval of three-fourths of the state legislatures to ratify it. But there were factors in the amendment's favor.
The Republican Progressive Split
The elections of 1910 and 1912 were affected by the split in the Republican Party- the conservative wing led by William Howard Taft and the progressive wing led by Theodore Roosevelt. The progressives would leave the Republican Party in 1912. According to historian John D. Buenker, the long-standing conservative Republican machines in the wealthy industrialized northeast lost strength due to progressive and voter angst about trusts, tariffs, and economic inequality. The anti-income tax forces lost their core region to resist ratification.
For example, New York, the home of the most millionaires and the wealthiest corporations, succumbed to the progressive tide. Upstate farmers and small-town residents were loyal to Roosevelt. The influx of more immigrants had led to an expansion of social welfare programs, with revenue support from a state corporate income tax and an inheritance tax. These two trends, according to Steven Weisman, contributed to a Progressive Republican and Democrat bloc in the New York legislature that ratified the amendment.
State Income Taxes
Another factor in acceptance of the income tax amendment was that some states, like New York, were enacting their own income tax laws. Some states found that they needed more revenue, other than from property taxes, to support public services like education. The income tax laws were being upheld in the state courts because the constitutional requirements of uniformity amongst taxpayers did not apply to individual states.
For instance, Wisconsin was the first state to adopt a permanent income tax in 1911, a 1% rate to incomes more than $800 for individuals and $1,200 for married couples. The Wisconsin Supreme Court announced that income taxes were "in successful operation in practically all of the great nations of the civilized world, except in the United States." On the other hand, Virginians refused to pay their income tax in 1909, with tax agents disappearing in the rural areas. The law was shortly repealed.
Corporate Excise Tax
Lastly, in 1911, when the U.S. Supreme Court ruled constitutional a corporate excise tax law enacted in 1909, it "gave a certain legitimacy to the ratification drive," according to Weisman. However, lawmakers in Virginia, persuaded by states' rights arguments, and Republican machines in Rhode Island, Connecticut, and Pennsylvania still offered resistance to the income tax amendment.
But some states that had rejected the amendment earlier, later ratified it. Arkansas, Massachusetts, New Hampshire, and New Jersey all did an about face. In Ohio, the Democrats broke the traditional Republican stranglehold on the state and pushed for the amendment. Even conservative Taft recommended passage of the amendment to the Speaker of the State Assembly.
On February 3, 1913, Wyoming became the thirty-sixth state to ratify the sixteenth amendment, thus acheiving the necessary three-fourths of the states. Weeks later, Secretary of State Philander C. Knox applied the Great Seal of the United States to finalize it. The income tax rode the progressive wave to passage in response to the need to fund public programs and to reduce the tax burden on the poor.
Source
Weisman, Steven R., The Great Tax Wars, Simon and Schuster: New York, 2002.
William L. Wunder - BA in History, University of Iowa, 1994, with Dean's List honors. History Buff- constant reader of books in American ...
