Did the Sixteenth Amendment Ever Matter? Does It Matter Today?

ABSTRACT-This Article argues that, if the United States was going to have a workable, national income tax, the Sixteenth Amendment was legally and politically necessary in 1913, when it was ratified, and that the Amendment remains significant today. The Amendment provides that "taxes on incomes" need not be apportioned among the states on the basis of population, as would otherwise be required for direct taxes. An apportioned income tax would be an absurdity, and, without the Amendment, Congress could not enact an unapportioned tax on income from property, the sort of tax that was struck down by the Supreme Court in 1895 in Pollock v. Farmers' Loan & Trust. The Pollock result was changed by the Sixteenth Amendment, but the core of the case has not been overturned. Indeed, in 2012, in National Federation of Independent Business v. Sebelius, Chief Justice Roberts favorably cited Pollock on a constitutional issue. All of that is to say that, without the Sixteenth Amendment, an unapportioned national tax on the income from property would continue to be invalid today. The Amendment is also important for what it does not say. It provides no protection for an unapportioned national tax on property if the tax is not treated as one "on incomes." Such a tax on property would therefore be subject to the apportionment rule and, as a result, would make the tax difficult, and perhaps impossible, to implement.INTRODUCTIONThis symposium is intended to celebrate (or maybe, for some, to condemn) the centennial of the Sixteenth Amendment to the Constitution.1 For the most part, the other papers in the symposium consider the effect of the income tax on all sorts of things, and those issues do have a connection to the Amendment-assuming, without the Amendment, we could not have an income tax in its present form.2 But, as we celebrate or condemn, surely it is appropriate to focus on the Amendment itself, which exempts "taxes on incomes, from whatever source derived," from the demanding apportionment rule that otherwise applies to direct taxes.3 This Article provides that focus, seeking to answer two questions: Did the Amendment ever matter either legally or politically? Does it matter now?Commentators often question the significance of the Sixteenth Amendment. For example, tax historian Joseph J. Thorndike recently wrote a piece titled Why Repealing the 16th Amendment Probably Wouldn't Matter.4 Yes, the "probably" provided wiggle room-it suggested the Amendment might have significance-but Thorndike's point was that, even if the Amendment is of historical interest, it does not matter today.5 If he was right, we might be commemorating the centennial of a provision that was only a blip in history. But the editors of this journal are not idiots; of course we have something worth commemorating. This Article demonstrates that the Amendment was, and in many respects still is, a big deal.Part I argues that the Amendment was critical in 1913, when it was ratified, for both legal and political reasons. Without it there would have been no broad-based, national income tax, at least not for many years, and waiting for years might not have made a difference: a constitutional amendment would probably still have been necessary. Part II argues that the Amendment remains important, even (and maybe especially) after the Supreme Court's 2012 decision in National Federation of Independent Business v. Sebelius (NFIB),6 which upheld the individual-mandate penalty in the Patient Protection and Affordable Care Act7 as a valid exercise of the taxing power.8To be sure, Chief Justice Roberts's key opinion on the taxing power in NFIB, joined, apparently reluctantly, by four other Justices,9 advanced a cramped conception of the scope of the direct-tax apportionment rule. The rule requires that a direct tax be apportioned among the states on the basis of population10-not an easy task11-but, if the term "direct taxes" includes few levies, the Sixteenth Amendment, which provides an exception to the direct apportionment rule, might seem to be unimportant as well. …