Front Page Titles (by Subject) F.: AMENDMENT XVI (1913) - Liberty, Order, and Justice: An Introduction to the Constitutional Principles of American Government
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F.: AMENDMENT XVI (1913) - James McClellan, Liberty, Order, and Justice: An Introduction to the Constitutional Principles of American Government 
Liberty, Order, and Justice: An Introduction to the Constitutional Principles of American Government (3rd ed.) (Indianapolis: Liberty Fund, 2000).
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AMENDMENT XVI (1913)
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
In Pollack v. Farmer’s Loan & Trust (1895), the Supreme Court held unconstitutional an Act of Congress establishing an income tax derived from property. An income tax, said the Court, is a “direct” tax, and Article I, Section 2, Clause 3 and Article I, Section 9, Clause 4 of the Constitution specify that direct taxes must be apportioned according to population. Such apportionment might be possible under a uniform capitation tax, but not under an income tax based on property.
The Sixteenth Amendment overturned the Pollock case, authorizing Congress to levy a tax on income, whatever its source, without apportionment. This Amendment strengthens the tax power of Congress, but necessarily reduces the power of States by reducing their tax base. In other words, there is less tax revenue available to the States as a result of this Amendment because there is less to collect after the Federal government has levied its tax. In this respect, the Sixteenth Amendment vitally affects the institution of federalism.
The Sixteenth Amendment, then, altered the relationships between the Federal government and the State governments. For Washington now enjoyed means for raising money more efficient than the means most States possessed. Beginning in the era of Franklin Roosevelt, the Congress found it expedient to secure cooperation from State legislatures by offering the States grants of money for purposes approved by the Federal government. Often the State could obtain the “grant-in-aid” by matching the Federal contribution; sometimes Washington required that the States contribute only a small percentage of the total costs, or perhaps nothing at all.
Thus increasingly, since the Second World War, the Federal government has paid the bills for large public projects and induced or compelled State governments to adopt and administer Federal programs. Federal funds are awarded for compliance or withheld for lack of cooperation from a State. States that do not comply “lose” Federal money given to other States. The result of this policy has been to diminish greatly the power of the State governments to make their own decisions, so shifting the political structure of the United States toward centralization, and toward policy-making by an elite of central administrators, rather than through the established processes of a democratic republic.
A recent example of how Federal grants may be used to “bribe” or compel State governments to obey Congress’s will—or perhaps the will of lobbyists in Washington who bring pressure to bear upon members of Congress—is the requirement that State governments must make the use of seat-belts in all automobiles compulsory, on pain of losing Federal funds for highway-building if a State fails to comply. In the past, States have also run the risk of losing Federal highway funds if they refused—as did California—to require motorcyclists to wear helmets. Such concerns formerly were regarded as falling wholly within the established police powers of the States. When many such decisions no longer can be made statewide or locally, but are determined in Washington by Congress, executive administrators, or interest groups—then it would seem the original federal plan of government has given way, for the most part, to a centralized political scheme not contemplated by the Constitution. But for the Income Tax Amendment, Congress would not have the financial resources that make these intrusions into the domain of State power possible.