Pollock v. Farmers' Loan & Trust Co., (1) 157 U.S. 429 (1895), argued 7–13 Mar. 1895, decided in three parts on 8 Apr. 1895 by votes of 8 to 0, 6 to 2, and 4 to 4; Fuller for the Court, Field concurring, White, Harlan, Brown, and Shiras in dissent, Jackson not participating. (2) 158 U.S. 601 (1895), rehearing argued 6–8 May 1895, decided 20 May 1895 by vote of 5 to 4; Fuller for the Court, Harlan, Brown, Jackson, and White in dissent. Pollock is not important as a precedent, since it was negated by the Sixteenth Amendment and was probably on the way to reversal by the Supreme Court even before that amendment's adoption. Nevertheless, the decision stands as one of the most notorious examples—according to progressive historians—of judicial adherence to laissez‐faire constitutionalism (see Progressivism).

At issue was the income tax law of 1894, the nation's first peacetime attempt to tax incomes, including those from securities and corporate profits. The tax was itself miniscule—a flat 2 percent on all incomes above four thousand dollars—but the principle was of great significance. On one side, the national government needed additional revenue to support its burgeoning activities. Social reformers also argued that some action was needed to reduce the great disparities of wealth resulting from the rapidly industrializing American economy. On the other side, private individuals and businesses claimed constitutional protection against such measures to redistribute wealth.

Pollock was a contrived case in which a stock‐holder sued to enjoin his bank from paying a tax that the bank did not wish to pay anyway. The Court agreed to expedite hearings for the case, reflecting the need to have the question settled rapidly.

Lawyers opposing the tax, headed by Joseph H. Choate of New York, argued that the income tax violated the principle of uniformity and that it was a “direct” tax that could be constitutional only if apportioned according to the populations of the several states. Neither argument had any support in precedent; the meaning of direct tax had long been given a narrow interpretation. Moreover, the Supreme Court, in Springer v. United States (1881), had sustained the temporary Civil War income tax, holding that an income tax was not a direct tax. Partly for this reason the lawyers freely resorted to hortatory claims that such taxation was an attack on private property rights and the first step on the road to communism.

In the initial decision, the Supreme Court separated the law into three parts, deciding each by a different vote. First, the Court held unanimously that a tax on income from state and municipal bonds was essentially a tax on the state itself, violating the principle of state sovereignty. Next, the Court, in an opinion by Chief Justice Melville Fuller, ruled that a tax on income from real property was a direct tax. The Court split 6 to 2, with Justices Edward D. White and John Marshall Harlan dissenting. Third, the Court divided equally, with Justice Howell Jackson being absent, on the question of whether the general tax on private and corporate incomes was also a direct tax. Evidence suggests that Justices Henry B. Brown and George Shiras joined White and Harlan in believing the tax constitutional. Thus, a major part of the tax law was left standing.

This situation pleased no one, and the Court immediately agreed to a rehearing on the issue of taxing general income. The terminally ill Jackson struggled to Washington, undoubtedly hoping that his vote would settle the question in favor of the tax's validity. But though Jackson voted to support the tax, another justice (probably Shiras) changed his position, producing a 5‐to‐4 vote invalidating the entire tax law because it was a direct tax that had to be apportioned among the states according to their populations.

This barebones description of Pollock gives no adequate impression of its emotion‐laden context. Both lawyers and judges departed far from constitutional argument; newspapers reported it fully and editorialized acidly. Harlan wrote privately that Justice Stephen J. Field acted like a “madman” throughout the case, but the dissenters' own opinions were similarly emotional. It was doubtless the most controversial case of its era.

Only one part of the decision stood after the adoption of the Sixteenth Amendment in 1913: the ban on the taxation of income from state and municipal bonds. Although Congress has never enacted such a tax, the Court reversed its 1895 objection to such action in South Carolina v. Baker (1988).

Loren P. Beth

POLLOCK V. FARMERS' LOAN & TRUST CO.

A 5–4 decision of the Supreme Court, Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429, 15 S.Ct. 673, 39 L.Ed 759, on rehearing, 158 U.S. 601, 15 S. Ct. 912, 39 L. Ed. 1108 (1895), declared the Income Tax Act of 1894 unconstitutional and ultimately led to the enactment of the sixteenth amendment, authorizing the imposition of an income tax by the federal government.

Charles Pollock—a Massachusetts stockholder employed by the New York defendant, Farmers' Loan & Trust Co.—appealed to the U.S. Supreme Court after unsuccessfully suing the defendant in federal courts to prevent it from breaching its fiduciary duty by filing returns for and paying a federal income tax. The tax was levied upon the profits that the defendant earned, including interest it received from income-producing real estate and bonds of New York City. Pollock alleged that such a tax, authorized by the Income Tax Act of 1894, was unconstitutional because it was a direct tax upon the property itself (28 Stat. 509). Article I, Section 2, of the U.S. Constitution mandated that all direct taxes be apportioned among the several states and Section 8 of the same article required that direct taxes be uniform. Pollock argued and the Supreme Court agreed that this tax did not satisfy either requirement. The tax was levied upon the rents or income of real property held by particular corporations and businesses and was, in effect, a direct tax upon the real property itself.

Pollock also raised the issue as to the validity of the tax as levied upon New York City bonds. The Court accepted the reasoning that since states were powerless to tax the operations or property of the United States, the United States had no constitutional power to tax either state instrumentalities or property.

The Supreme Court ruled that the Income Tax Act of 1894 violated the Constitution and that the taxes imposed pursuant to it were void. It reversed the decree of the federal circuit court and remanded the case.

As a result of the decision in Pollock v. Farmers' Loan & Trust Co., Congress recognized the need for a constitutional provision permitting the levy of federal income tax without apportionment among the several states. It took, however, eighteen more years before there was sufficient support for the passage of the Sixteenth Amendment.