POLLOCK V. FARMERS' LOAN AND TRUST COMPANY

In 1898 the U.S. Supreme Court declared the income tax unconstitutional. It had been levied as part of the Wilson–Gorman Tariff Act (1894) and taxed all incomes over $4,000 at two percent. The ruling came in the case of Pollock v. Farmers' Loan and Trust Company. Massachusetts resident Charles Pollock was a stockholder in the loan and trust company. In 1895 Pollock sued on behalf of himself and other shareholders, challenging the payment of taxes on the interest and dividends on deposit in the bank during the previous year. In this case, the justices had to decide fundamental questions: (1) whether the federal government could apply "income duty" to the bank deposits of U.S. citizens; (2) whether it could levy an income tax at all. A bare majority of five judges agreed that the Constitution prohibited direct taxation and that, instead, the tax burden had to be apportioned to each state (based on their population). The high court's decision stated that the tax was "repugnant to the Constitution . . . income tax is invariably classified as a direct tax." But the need for an income tax did not abate, and after the turn of the century the graduated tax began receiving bipartisan political support. Eventually the states ratified the Sixteenth Amendment (1913), which authorizes the U.S. Congress to levy and collect income tax without regard to a census (apportionment).

See also: Sixteenth Amendment

POLLOCK V. FARMERS' LOAN AND TRUST COMPANY

POLLOCK V. FARMERS' LOAN AND TRUST COMPANY, 157 U.S. 429 (1895), was a case in which the Supreme Court ruled that the income tax provision of the Gorman-Wilson tariff (1894) was unconstitutional because it was a direct tax and hence subject to the requirement of apportionment among the states according to population. In a prior hearing, only the tax on real

estate income had been declared unconstitutional, and the Court was divided evenly, four to four, regarding other forms of income. On a rehearing, the Court decided five to four against the income tax on personal property because one justice, probably David J. Brewer, reversed his earlier decision and opposed the income tax, and another, Howell E. Jackson, who had not participated in the earlier hearing, voted with the minority in the rehearing. This decision inspired a popular attack on "judicial usurpation," resulting in the Democratic income tax plank of 1896 and leading ultimately to the passage of the Sixteenth Amendment (1913).

BIBLIOGRAPHY

Paul, Randolph E. Taxation in the United States. Boston: Little, Brown, 1954.

HarveyWish/a. r.

See alsoIncome Tax Cases ; Springer v. United States ; Taxation .