Hey guys, welcome to HipHus history, the Constitution for dummy series, marches forward Amendment 16. Guys, true or false, the United States federal government could tax income before the 16th Amendment, and of course you know that's true. That's right guys, let's learn about the history of the 16th Amendment, what it says, what it means where it came from. And let's see if we can't grow our brain, get it up in the morning guys, here we go. Alright, we're going to read the words in a second guys, but I want to get kind of the umbrella statement down, and the umbrella statement if you're in an American history course is the idea of graduated income tax. And basically the way that I have my kids remember it, it's a little bit stupid, but I always say them, hey, happy birthday, it's your 16th birthday. Oh, I got you some cash and aren't you graduating high school? Now I know that's a little bit to remember, but if you remember that joke and your 16th birthday, you get cash before graduation, that's the whole idea. Income tax is the money concepts, of course, the 16th Amendment, and the idea of you graduating that you're rising to the next level is actually the effect of the 16th Amendment that we're going to have an income tax that's based on basically your income. So the more money you make, the higher percentage of an income tax that you're going to pay is a percentage of your income. So there we go, let's read the words now, happy birthday, it's your graduation, I got you some momo, momo. So there we go, we're going to read the words, words are important, let's put them on the screen, my straw a little bit of music. The 16th Amendment, the Congress shall have power to lay and collect taxes on incomes from whatever source to write without a portion of it amongst the several states and without regard to any census or enumeration. So that's the 16th Amendment, and what the 16th Amendment really does is it kind of changes the meaning of some earlier parts of the original constitution. Article 1, section 2, clause 3, you can see the link below basically says in terms of house representation that that should be a portion by census and it also says direct taxes. So a portion of it in direct taxes would be a portion by census. So of course the question becomes what is a direct tax? We're going to talk about that in a second. Article 1, section 8, clause 1, which is kind of the laundry list of delegated powers that we give to Congress includes the power to tax. And we also see in Article 1, section 9, basically a limit on Congress again referring to the idea of direct taxes having to be related to a portion. A portion of it is the idea that we look at the census and the direct taxes are kind of correlated to the census of that state. So larger states could have larger direct taxes. That process is very mushy. The big misconception, this is the life alert right here. The big misconception is that the 16th amendment is what kind of legalized or allowed for income tax in general. And that's just not true. Previously the revenue act of 1861 and the revenue act of 1862 were not only direct income taxes on the people but they also were graduated and the Civil War there was a 3 to 5% graduated income taxes on salaries above $600. And this was allowable. This was appalled. However those taxes eventually expired. And without that type of income tax there begins to be more reliance on the tariff. This is kind of linking in the Republican Party and the idea of tariffs. The problem with tariffs in terms of people that have problems with tariffs is that it taxs as goods. So people that rely more on their income and spending that money right away because they need to buy necessities for the house or they're a farmer and they need to buy necessities to farm. Yada yada yada are going to see higher prices. The tariff affects them more. During the late 1800s there becomes kind of a call of action from the populists. Not just the populist but the grainback movement. The Democratic Party, especially under William Giang's Brian, the socialist party, the labor movements, all of these kind of people interest groups from the lower end are calling for some type of income tax. And that happens in 1894. So in 1894 we get a new income tax. This income tax is like 2% something like that but someone's going to have a problem with it. So bring on the Supreme Court case. So in 1895 we get the court case Pollock versus farmer's loan and trust. Pollock is basically suing the company that he owns stocks and the corporation he owns and he owns stocks and because that corporation is paying this new tax. This new tax is the Wilson Gorman Act. It's a 2% income tax on income is over 4,000 but what Pollock and I think Pollock was like 10 stocks or something. It's so it's more of a kind of like an ethical thing I guess. He's against this corporation that he has a piece of paying his income tax because he believes it's a direct tax and it's unconstitutional and the Supreme Court agrees. So this is the big deal. The big deal is that they're cutting off the stream of taxes that are coming not from income from labor. We're not talking about the guy that works at Walmart. We're talking about the guy that owns Walmart. Basically saying that you can't have a tax on property. That's been established. That's a direct tax. The federal government can't have property taxes because that's a violation of Article 1, Section 2 of direct taxes without apportionment. What the Court says is that income that's made off your property, not your labor, your property. So corporation, I guess being that property, so dividends and rental income and any other income other than labor that's made money that's made off money can't be taxed because that's a direct tax and that direct tax is a violation of the Constitution. So this shuts down a huge stream of income for the federal government and then at the turn of the century we see kind of a change in economic factors as a rise in the cost of goods. So tariffs are hurt in the people and we also see the development of kind of progressive Republicans like Teddy Roosevelt and kind of the urban centers of the North becoming more progressive than wanting that income stream from the upper ashulans of society corporations. So in 1909 our tax gets behind the idea and Congress gets that proposed amendment through and throws it to the states. Remember two thirds of both houses three fourths of false states. So in 1912 all three candidates supported right. You have the bull moves, Teddy Roosevelt. You got my big man William Howard Taft and you got my spectacle guy Woodrow Wilson. They all support this kind of progressive idea of income tax and it finally comes true. In 1913 February 25th we get the 16th amendment. It needed 36 states. It got 42 states and basically what that has been translated into is a graduated income tax. But look Congress can change that. We can have a flat tax or we can go back to tariffs but constitutionally now we can tax money that's made off money. And remember if you repeal the 16th amendment you still could have income tax. We established that right income tax on labor. So the working man could still have his income tax but I guess that his boss wouldn't have to pay the income tax. Something like that. I think it's important that when we talk about income tax that we know a little bit about the history of income tax since 1913. And if you look at the chart you can clearly see that starting in 1913 with a top rate being about 567% it quickly jumps up in World War I upwards to 78%. During the 1920s the tax rate is lower. This is kind of the laissez-faire administration of harding and coolage and Hoover about 27%. And then during the Great Depression we see it jump up all the way up to about 65% and then when World War II starts we're jumping up to 80, 90, 95%. That rate then stabilizes a little bit down to about 70% at the end of World War II. And then with the Reagan revolution we see it drop down all the way to around 35%. And then basically fluctuating very close to that 35% range through the 1980s, 90s and all the way up to today. Now there's definitely people out there I know that I think that this is a faulty amendment that the process was somehow tainted or that the 14th amendment and the Equal Protection clause would bar kind of the idea of a graduated income tax because we're treating people I guess non-equally by taxing them to... There's also an argument out there that the amendment doesn't include repeal language so therefore it should be nullified or voided. You could throw it down there in the comments I think that right now most of that has been found pretty frivolous in the court system. That doesn't mean it's not, you know, right? I don't know but you can think what you want. I don't care. Jimmy Grant's going on okay. So there you go 16th amendment guys, happy birthday. You know what I got? Check out just a mo mo is it? You're graduation. All right guys you know it now the 16th amendment. Make sure you check out if you use guys if you haven't subscribed just click my face. 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