Federal Income Tax Act

In the case of Pollock v. Farmers Loans and Trust Company, the Federal Income Tax Act was the main statute in scrutiny under this case. The act was created in 1894 in which Congress implemented personal income taxes, and attempted to extend it to business enterprises. This act was able to tax two percent on any business that accumulated more than 4,000 in profits (Pollack 328). The income taxes of 1894, attempted to mimic a previous tax act that was enforced during the Civil War that eventually repealed ten years later.

Congress wanted to pursue this particular type of tax in order to supplement reduction on previous tariffs. Sharing a small flat rate cost of the government was fair, especially to those who are in the top 10 percent of the country’s wealth. Congress stated that the tax would be able to relieve some of the financial burden off the government. Both parties choose to pass the act for the appeasement of the angered populist. They believed this would reduce the likelihood of radical political actions upon federal government (Pollack  304).

Although there were many reasons to justify the act, it was still a direct tax on income and land. Since this take is considered a direct tax, it must be apportioned to states, which is why the Supreme Court determined the income taxes of 1894 unconstitutional (Pollack 307). There was no important changes to this statute, other than is declared unconstitutional, but this gave rise to the 16th Amendment of the Constitution, which overturned this case. 16th amendment states that congress has the right to collect taxes on income without apportionment to the states.

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