The Leaflet: Tax Day, Income Taxes, and Constitutional Amendments

Published April 20, 2017

On April 18, Americans suffered through another Tax Day, a time when many taxpayers angrily point to the federal government’s passage of the 16th Amendment as the root cause of their dismay. While the federal government deserves plenty of blame come tax season, taxpayers shouldn’t forget state legislatures played a significant role in the ratification of the income tax amendment.

In 1890, the Tariff Act, otherwise known as the McKinley Tariff, was passed, imposing steep tariffs that eventually resulted in the enactment of the Wilson-Gorman Tariff Act in 1894. Wilson-Gorman reduced tariff rates and introduced a 2 percent income tax. In 1895, the Supreme Court declared the Wilson-Gorman Tariff Act income tax unconstitutional in Pollock v. Farmers Loan & Trust Co.

In 1909, Congress passed a resolution approving an amendment to the U.S. Constitution for the establishment of a federal income tax. Prior to becoming law, amendments must be ratified by three-fourths of the states. It would take four years for the necessary threshold to be met, when in February 1913, Delaware became the 36th state to approve the resolution, thereby enabling ratification. A total of six states did not participate in ratification. 

The history of the income tax and it ratification is of great significance, because many states are currently proposing legislation aiming to amend the U.S. Constitution for the inclusion of a federal balanced budget amendment.

Though all the amendments passed in the nation’s history thus far have been initiated by Congress, the Constitution allows for states to approve amendments under Article V of the Constitution, provided that two-thirds, or 34 states, pass applications to call a convention to propose amendments to the Constitution.

Currently, an Article V movement calling for a balanced budget amendment to the U.S. Constitution is gaining traction. At the end of 2016, a total of 28 states had passed resolutions to apply for an Article V convention for the purpose of proposing a balanced budget amendment.

In 2017, Arizona, Idaho, Kentucky, Montana, South Carolina, Wisconsin, and Wyoming have introduced resolutions applying for an Article V convention for the purpose of a balanced budget amendment. Arizona and Wyoming successfully passed their resolutions. Maryland rescinded all its previously approved Article V applications.

In addition to the states have passed or are considering approving an application for balanced budget amendment, Arizona passed a resolution that provides for a planning convention to take place on September 12, 2017.

The call for a balanced budget amendment stems from the increasing level of federal debt and the great deal of power seized from the states by the federal government in recent years. In a recent Research & Commentary, Government Relations Coordinator Lindsey Stroud reported, “As of February 3, the United States held over $19 trillion in total public debt, a figure that is expected to grow over the next decade.” Stroud also found the “federal government has failed to address the mounting debt crisis, and the 115th Congress approved in January a nearly $10 trillion increase of publicly held debt.”

It is important for state lawmakers to understand the significant role states played in the establishment of the federal income tax and the responsibility they have to support policies that will hold the federal government accountable. State legislators should use the opportunity presented by the Article V movement as a vehicle to reestablish states’ rights and to ensure the federal government acts in a more fiscally responsible manner in the future.


What We’re Working On
Budget & Tax

Research & Commentary: Nebraska Tax Reform
In this Research & Commentary, Senior Policy Analyst Matthew Glans examines a proposal to reform Nebraska’s individual and corporate tax rates. Glans says, “At first glance, Nebraska’s tax system appears competitive. According to the Tax Foundation, state residents pay $3,853 per capita in state and local taxes, ranking the state 17th highest in the nation and comparable to neighboring Colorado and Kansas.” Read more

Colleges Replacing Civics Education with Progressive Activism, Study Finds
In this article for School Reform News, Higher-Education Editor Jane S. Shaw writes about a 523-page report by the National Association of Scholars (NAS) detailing the history and current state of “new civics,” which appears under labels such as “civic learning,” “democratic engagement,” and other titles that imply political action. The heart of what NAS calls “new civics” is “service learning.” Although this term suggests students’ voluntary involvement in community activities to help others, it is much more than that. Not only does service learning merge education and activism, Shaw writes, but from its start in the 1960s, its goal has been to permeate the academy with the radical political goals of the far left. With its innocuous name and emphasis on volunteerism, service learning has quietly expanded throughout academia. Read more

Energy & Environment
Texas Sues EPA over Sulfur-Dioxide Rule Designations
In this article for Environment & Climate News, Michael McGrady writes about Texas Attorney General Ken Paxton’s filing of petitions in the U.S. Fifth Circuit Court of Appeals and the U.S. Court of Appeals for the District of Columbia Circuit challenging the U.S. Environmental Protection Agency’s (EPA) decision to designate three areas in Texas as out of compliance with federal clean air standards for sulfur dioxide. In December 2016, EPA issued a final rule determining three areas in Texas failed to meet the federal one-hour standard for sulfur dioxide of 75 parts per billion established under 2010 revisions to the National Ambient Air Quality Standards. Each of the noncompliant areas has coal-fired power plants EPA says are the source of the sulfur-dioxide pollution. Paxton’s suits claims EPA’s sulfur-dioxide attainment designations are flawed, and the State of Texas says monitoring results in the areas in question show them to be in or near compliance with federal sulfur-dioxide standards. Read more

Health Care
Research & Commentary: Maine Should Reject Maintenance of Certification
In recent years, many states have sought reforming maintenance of certification laws (MOC), which require physicians to complete additional testing and programs to maintain board certification. In this Research & Commentary, Senior Policy Analyst Matthew Glans examines MOC reform efforts in Maine. Glans says  “providing certification for doctors has become a profitable industry,” and while MOCs were designed to ensure education and proper training, they shouldn’t be allowed to “act as a profit center for medical board organizations.” Read more

From Our Free-Market Friends
Rich States, Poor States, 10th Edition
In the 10th edition of Rich States, Poor States, a notable study by Arthur B. Laffer, Stephen Moore, and Jonathan Williams, the authors examine the 50 states’ economic outlooks using 15 state policy variables and establish economic performance rankings based on state gross domestic product, absolute domestic migration, and non-farm payroll employment. The authors say the top 10 states (in order) are Utah, Indiana, North Carolina, North Dakota, Tennessee, Florida, Wyoming, Arizona, Texas, and Idaho. Read the full report here