Supreme Court

Pollock v. Farmer's Loan and Trust Co., 1895

Background-information

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A two percent tax on incomes over $4,000 was incorporated in the Wilson-Norman Tariff of 1894, a test case was quickly arranged to bring the constitutionality of the measure before the Court. An income tax had been passed during the Civil War and had been retained for some years afterward. Its constitutionality, never attacked while it was in effect, had later been firmly asserted by the Court in Springer v. United States (1881). Nonetheless, the Pollock case, coining at a time of social upheaval, and when an extraordinarily conservative body of justices sat on the Court, took a new and surprising tack which made this, after the Dred Scott case, the most widely criticized decision in the Court`s history. The tone of the opposition to the tax was struck by Joseph H. Choate, who appealed to the justices to halt the "communist march" as he called the current demand for social reform.

The case was heard twice. In its first presentation, the issue was whether a tax upon rents or income issuing out of lands was constitutional, in the light of the clauses of the Constitution Article I, section 2, clause 3, and section 9, clause 4-which provide that "direct taxes" be apportioned among the states according to their population as established for representation in the House, and which prohibit any "cepitation, or other direct, tax" unless levied in proportion to the census enumeration. On the first hearing, the Court, by a vote of six to two, found that a tax on income from land, in order to be constitutional, must be apportioned according to population.

The question remained whether a tax on other forms of income was also to fall under the Court`s ban. Justice Howell E. Jackson, who had been ill during the first argument of the case, returned. The entire Court, which had been divided four to four on important questions raised by this case, now heard a reargument. By a five to four vote, the Court decided that taxes on income from personal property were direct taxes, precisely as were taxes on income from land, and were therefore also unconstitutional. A roar of indignation went up throughout the country, though many conservatives were happy at what they considered a blow to "Populism." Because of this decision, the Sixteenth Amendment had to be passed in 1913 before income taxes could be levied.