The Sixteenth Amendment established a federal income tax after the Supreme Court declared previous tax laws unconstitutional, authorizing Congress to collect taxes on incomes directly, leading to a more equitable taxation system.
The amendment that established a federal income tax is the Sixteenth Amendment. This amendment came into being after prior federal income tax laws were declared unconstitutional by the Supreme Court. Recognizing the need for a new source of revenue to supplement tariffs and to impose a more progressive tax system, the Sixteenth Amendment was proposed by Congress in 1909 and ratified in 1913. It granted Congress the authority to tax the income of individuals directly without apportioning it among the states and regardless of any census or enumeration.
Before the Sixteenth Amendment, the government primarily relied on tariffs for revenue, which disproportionately affected the working poor. After its ratification, a federal income tax was put in place, which allowed for reducing tariffs and transitioning to a taxation system that asked for contributions from citizens based on their earnings, with higher earners contributing a greater percentage of their income. This approach to taxation aimed at achieving a more equitable system and addressed calls from movements such as the Populists and Progressives for taxation that targeted the wealthier classes.