United States Income Tax Essay

Custom Student Mr. Teacher ENG 1001-04 19 March 2017

United States Income Tax

Income tax, in general is one of the ways how a government earns money. Through it, institutions, roads, healthcare, facilities, etc. are funded. The United States of America has one of the most productive and effective income tax systems in the world as observed in its strong economies. In early 1700’s, the nation’s taxes majority came from internal taxes on sugar, tobacco, alcohol corporate bonds and slaves. Moreover, in 1817, the Congress relied on tariffs on imported goods to fund the government projects.

Meanwhile, in 1862, Congress endorsed the first and official income tax law of the nation. It was based on the ideology of graduated taxation and/of withholding income at the cause. (“History of the Income Tax in the United States,” 2007)  This law is the antecedent of the modern taxation system in America. Since then, it underwent many amendments and revisions and the latest was signed in 2005 and 2006 which states that positive rates on capital gains and dividends lift the exemption level for the Alternative Minimum Tax and passed a new tax incentive designed to convince the citizens to save more for retirement.

On February 13, 1913, the Sixteenth Amendment of the United States Constitution was ratified. Basically, it claims superiority over the Pollock v. Farmer’s Loan and Trust Co. The latter’s primary function limited the ability of the Congress to impose income tax.  Because of such, the 16th Amendment was passed which allowed the Congress to levy an income tax without consideration to the State or the consensus. (“16th Amendment to the U.S. Constitution: Federal Income Tax (1913),” 2007)

Before this amendment was ratified, Charles Pollock—a stockholder employed by the Farmers’ Loans and Trust Co.– filed a petition to the U.S. Supreme Court after ineffectively suing the company in various federal courts to hinder it from contravening its fiduciary duties by filing returns for and paying a federal income tax. It (the tax) was imposed upon the income that the company earned which includes interests it received from income-producing real estate bonds in New York City. (“Pollock v. Farmers’ Loan and Trust Company,” 2008)

He accused that the Income Tax Act of 1894 was unconstitutional because it was an undeviating tax upon the property itself. In the end, the Supreme Court ruled that the Income Tax of 1894 dishonored the Constitution and that the taxes forced pursuant to it were void. As a result of the case, the Congress recognized the necessity for a constitutional provision allowing the levy of federal income tax with no apportionment among the several states. After 18 years, the 16th Amendment was approved.

            Basically, this amendment states that the Congress shall have the authority to collect taxes on incomes from whatever the source is and without apportionment amongst states which disregards any census or details. According to Brushaber, it prevents the court from doing what the Pollock court did—which was to deem the cause of the income to obtain the tax on that income out of the class of excises and putting it under the class of direct taxes. Overall, since the tax on an income (regardless of the source) is considered indirect tax and since it is not a direct tax, therefore, it should not be apportioned.

 This tax collecting scheme implies that the government can collect indirect taxes which further imposes that the tax is federal in nature. Because of such, there may be a case of centralization in the government; and this only brings forth a bad case of forthcoming government scenario—conflicts may arise from different views of the states. And if this case did happen, the Congress and the government may expand to different agencies or offices with the same function—which will the government may just spend more money on; in whichever case, money will be lost to some futile efforts. The present tax collecting scheme imposed by the American government should stay the same as it is today so as to maintain the economic stability that they are enjoying  today.


16th Amendment to the U.S. Constitution: Federal Income Tax (1913) (Publication. (2007). Retrieved February 2, 2008: http://www.ourdocuments.gov/doc.php?flash=true&doc=57

History of the Income Tax in the United States (Publication. (2007). Retrieved February 2, 2008, from Information Please Database: http://www.infoplease.com/ipa/A0005921.html

Pollock v. Farmers’ Loan and Trust Company (Publication. (2008). Retrieved February 2, 2008, from Net Industries: http://law.jrank.org/pages/9269/Pollock-v-Farmers-Loan-Trust-Co.html

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