Income Tax Cases

INCOME TAX CASES

INCOME TAX CASES. Confronted with a sharp conflict of social and political forces, in 1895 the Supreme Court chose to vitiate a hundred years of precedent and void the federal income tax of 1894 (Pollock v. Farmers' Loan and Trust Company, 157 U.S. 429; Rehearing, 158 U.S. 601). Not until 1913, after adoption of the Sixteenth Amendment, could a federal income tax again be levied.

The 1894 tax of 2 percent on incomes over $4,000 was designed by southern and western congressmen to rectify the federal government's regressive revenue system (the tariff and excise taxes) and commence the taxation of large incomes. Conservative opponents of the tax, alarmed by the rise of populism and labor unrest, saw the tax as the first step in a majoritarian attack on the upper classes.

Constitutionally, the tax seemed secure. The Court, relying on the precedent in Hylton v. United States (1796), had unanimously upheld the Civil War income tax in 1891 (Springer v. United States, 102 U.S. 586), declaring that an income tax was not a "direct tax" within the meaning of the Constitution and thus did not require apportionment among the states according to population. The Court had stronglyintimated in Hylton that the only direct taxes were poll taxes and taxes on land.

Prominent counsel opposing the 1894 tax appealed to the Supreme Court to overthrow the Hylton and Springer precedents. Defenders of the tax, including Attorney General Richard Olney, warned the Court not to interfere in a divisive political issue. On 8 April the Court delivered a partial decision, holding by six to two (one justice was ill) that the tax on income from real property was a direct tax and had to be apportioned. Since a tax on land was direct, said Chief Justice Melville W. Fuller for the Court, so was a tax on the income from land. On other important issues the Court was announced as divided, four to four.

A rehearing was held, with the ailing justice sitting, and on 20 May the entire tax was found unconstitutional, five to four. Personal property was not constitutionally different from real property, the chief justice argued, and taxation of income from either was direct.

Public and professional criticism was intense, and the Democratic Party platform of 1896 hinted at Court packing to gain a reversal. From the perspective of the judicial role in the 1890s, the Pollock decisions, together with other leading cases of the period—such as the E. C. Knight case and the Debs injunction case—marked the triumph of a conservative judicial revolution, with far-reaching consequences.

BIBLIOGRAPHY

Ely, James W. The Chief Justiceship of Melville W. Fuller, 1888–1910. Chief Justiceships of the United States Supreme Court Series. Columbia: University of South Carolina Press, 1995.

Lasser, William. The Limits of Judicial Power: The Supreme Court in American Politics. Chapel Hill: University of North Carolina Press, 1988.

Arnold M. Paul

Andrew C. Rieser

See also Hylton v. U.S. ; In Re Debs ; Pollock v. Farmers' Loan and Trust Company ; Populism ; Springer v. United States .