Final answer:
The 16th Amendment was ratified in 1913 and established the federal government's ability to impose an income tax on individuals without apportioning it among the states. This allowed for a progressive taxation system and has become a fundamental component of American tax policy.
Step-by-step explanation:
What is the 16th Amendment?
The 16th Amendment to the United States Constitution was ratified in 1913 and allows Congress to levy a federal income tax without apportioning it among the states or basing it on the United States Census. This amendment emerged from the need to replace revenue after lower tariffs and a Supreme Court ruling that had previously found federal income tax laws unconstitutional. Prior to the amendment, the federal government primarily relied on tariffs on imports for revenue, which disproportionately affected the working poor. The amendment aimed to implement a more equitable system of taxation, thereby introducing a progressive tax, which imposed higher rates on those with higher incomes. With its passage, the legislation only impacted the wealthiest 5 percent of Americans, as it included an income exemption that most workers did not meet.
Every year, as part of the federal government's revenue system, people pay taxes on the money they earn through employment or trade. The implementation of the 16th Amendment marked a significant change in the funding of the federal government and has influenced the dynamic of federal tax policies to this day.