The text seems simple enough, but it goes to great length to address a particular issue: Apportionment. Utah and Arkansas have similarly sized populations. Under an apportioned tax, the two states would be responsible for the same amount of income taxes. Under an apportioned tax, the low-income individuals of Arkansas would end up paying a higher tax rate than higher-income individuals in similarly sized wealthier states.
The Constitution, as the drafters wrote it, allowed the government to collect indirect taxes like a sales tax and excise tax without apportionment. But indirect taxes also meant that everyone had to pay the same tax rate, no matter how much or how little you earned.
The 16th Amendment allowed Congress to make the tax system more progressive meaning the rate at which you pay taxes increases with your income , to ensure those that could afford to pay more as a result of higher income paid more.
It also allowed the federal government to reduce its reliance on indirect taxes. Even though the 16th Amendment gave Congress the power to impose income taxes, there are plenty of people who continue to argue against the validity of the amendment, the Internal Revenue Service IRS , and taxes in general.
Others have argued that filing taxes is a form of self-incrimination, which the 5th Amendment also protects against. The Supreme Court has taken up both of these issues and has upheld both the 16th Amendment and the income tax system.
Some may also argue that filing a tax return and paying income taxes are voluntary. In reality, figuring out how much taxes you owe may be voluntary rather than having the government figure it out for you , but the Supreme Court has ruled that filing a return and paying income taxes are both mandatory. The Supreme Court and circuit courts have also struck down the argument that income taxes are a form of slavery. But even without Ohio, enough states had ratified the amendment. Since the ratification of the 16th Amendment, courts have repeatedly upheld it and the income tax system.
In an effort to protect the personal rights of taxpayers, the IRS abides by the Taxpayer Bill of Rights, which includes:. A zero-coupon bond is a type of that trades at a discount and where the only payment occurs when the reaches maturity.
An exempt employee is one who is not entitled to overtime pay, or covered under the minimum hourly wage, by nature of their job duties and manner of compensation. A reimbursement is a payment that one party pays to another as a result of an that the first individual incurred on behalf of the other.
Producer surplus is the amount of money a producer receives from selling goods that is above the minimum amount they were willing to accept for them.
A swap in finance is a contract in which two parties agree to exchange the cash flows of one financial instrument for another. Updated January 29, That amendment was challenged in the Supreme Court, which decided that income tax qualified as a direct tax and was therefore unconstitutional.
Congress passed the resolution proposing the tax, and the matter was submitted to the states. Though Republicans protested, by February 3, , the requisite number of states ratified the amendment, overruling the court decision. The sixteenth amendment is viewed as the first of the Progressive Era amendments, signaling a major shift in the way government influenced society.
Marked by a push for political and social change and an end to corruption, the Progressive Era ushered in a new period of reform. You can renew your subscription or continue to use the site without a subscription.
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