16th Amendment


"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."  16th Amendment to the US Constitution


The Democrat governors of; Connecticut, New York and New Jersey have sued the federal government in an attempt to block application of the new federal tax law.  Their specific complaint is that the new law abolishes the federal income tax deduction for state income taxes.  These three states and a few more including California have very high state income tax rates.  They also have a disproportionate number of people whose incomes place them in the 1% percentile of highest US individual incomes across the country.  It was reported this AM on Fox Business News that the average state income tax in New York for 1%ers is $500,000.  Under the old federal tax law this state tax was deductible from gross income before net income for federal taxation was determined.  To say that this is a massive loss for such folk is completely true.  Deplorable Trump voters typically either live in states with much lower income tax rates or don't make anything like that much money.  So for them the loss is much less especially considering lower tax rates in the new law and a doubled standard deduction.  In fact a great many of them will pay no federal income tax at all.  Quite a few paid no federal income tax under the old law and now that number will be larger.

In any circumstance the 16th Amendment is clear in that the federal government is not required to "balance" taxation among the states.  pl  


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31 Responses to 16th Amendment

  1. scott s. says:

    The constitution taxing power cites “capitation and other direct taxes” and “duties, imposts, and excises”. Courts over time have simplified that as “direct” and “indirect”, the difference is that direct taxes must follow the rule of apportionment, while indirect taxes must follow the rule of uniformity. Courts have also held that the taxing power extends to just about everything. A series of USSC decisions in the late 1800’s held that for a tax on income, you had to look to the source of income to determine if the tax was direct or indirect and hence which rule to apply. In particular, tax on income from rents and dividends were determined to be direct taxes. The 16th amendment was passed to declare that income taxes follow the rule of uniformity regardless of source of income. I am curious about the exact theory these states are arguing and need to check out the pleadings.
    The history of the apportionment rule is interesting. It was first proposed during debate on the Articles of Confederation. Funding of the general government under the articles was to be done by state allocation in proportion to the “wealth” of each state. The problem was determining the wealth. One method suggested was to use population as a proxy for wealth. The southern states objected that the slave population didn’t create as much wealth as freemen, and the “3/5ths” compromise was proposed to compensate for that. In the end, the population proxy was not selected, but the idea would resurface during the Constitutional Convention.
    Apportioned direct taxes were levied during wartime in the early republic. They worked like a property tax with assessment districts set up throughout the country. The dollar amount was apportioned to each state, and the practice was that after adding up the tax on the assessed property in each state at a legislated rate, the remainder of each state’s bill was funded by setting the necessary rate on real property to make up the difference. This made administration difficult.

  2. turcopolier says:

    scott s
    The 16th Amendment (ratified in 1913) superseded all previous provision in law and the constitution on this subject. pl

  3. doug says:

    The tax reform act was a clever piece of work. It adversely affects the highest earners and professionals in the large, high tax blue states. I’m guessing there will be significant emigration of these folks out of CA, NY, NJ, etc. to places like TX, FL, etc. I’m in CA and while not quite in the 1%, I am retired and pay hefty property tax and state taxes way beyond the 10k maximum deductible. So I will be paying more taxes this year. Such is life. It will also take a toll on the higher end of the real estate prices so I’ll take a hit there too.
    But unfair? No. If anything it will probably result in less variation amongst the states with some of the industry and tech that remains in CA, NY, etc. moving to states that could use the boost. Probably a good thing. It will also boost the economies in more red states than blue so the political motive is obvious.
    As for the 16th amendment argument, it looks pretty weak. After all, the tax rates set by the various states are up to the states. If NY wants to be treated like TX, they could just change their state laws.

  4. turcopolier says:

    The 16th Amendment essentially says that the federal income tax applies to individuals, not states, country wide. So far as I can see, the states have no say on the matter of income taxes. BTW VA has a significant income tax as well. pl

  5. eakens says:

    Maybe tax payers in California will now think twice before voting for a tax, and not rubber stamp every bullshit piece of costly legislation that is put in front of them.

  6. Fellow Traveler says:

    Was at a New Years party in an exurb in TX and they’re paying 2.5% property tax. Met three retired couples who have to move – their homes have gone from $300K to $700-800K and the rates/valuations keep going up.
    Just turning into another CA without the services and no Prop 13. All the toll roads are nice though.

  7. TV says:

    And yet the Democrats and the media, (but I repeat myself) continue to bloviate about the tax law benefiting the “evil rich” (you know, like Nancy Marie Antoinette Pelosi).
    “Let them eat crumbs.”
    How much deeper into hypocrisy can the Democrats go?
    And how dumb are the voters who continue to buy this garbage?

  8. TV says:

    For a fee, you can easily find a lawyer to argue that the Constitution is unconstitutional.
    Never underestimate how deep into the sewer a lawyer will go.

  9. doug says:

    Yeah, no prop 13, but no state income tax so the 10k cap will not hurt much and only affects homeowners assessed over 400k. Assessments are usually smaller than market value in TX (Not in CA though). Meanwhile CA state income tax goes up to 13%. The top 1% pays most of the total state income taxes. This had been subsidized by a big federal deduction. No longer. Won’t take many of them leaving to create one hell of a big state deficit crunch.

  10. doug says:

    The majority of people in CA, just like all the other states, will see a tax cut. The ones getting nailed in CA are the assorted high income types with $5M homes (which will get you about 2,500 sq ft on .5 acres in Silicon Valley) that are paying 6 figure state taxes. All but 10k gets clipped.

  11. doug says:

    Yes, states don’t have a say in federal taxes, which is why I think they have a week case. Tells you something that they are trying a legal Hail Mary that will require rather twisted reasoning to win.
    But states do determine their own tax structure and CA just got a wakeup call that their high taxes will no longer be subsidized by the feds. At least the amounts in excess of $10,000.
    And it won’t take many of the 0.01% fleeing CA to bite a chunk out of their budget.
    And that bothers me since I live in CA. It’s hardly unfair though.

  12. Tel says:

    It’s not a question of balancing among the states, it’s more a question of the definition of “income”.
    An accountant would never use the word “income” because it really has no meaning. The well defined words are “gross revenue” to mean money that came in the door, and “nett profit” to mean what you have left after expenses.
    Unfortunately “income” as defined by US tax law is neither of these things, and the details change in very strange ways from time to time and place to place. For example, if a corporation needs to pay some state taxes this would be a standard cost of doing business and thus deduct from the corporate profit (even though in theory, people are corporations and corporations are people as per the standard legal fiction). Thus, states are now getting ready to tax corporations (as a type of payroll tax) instead of workers, but in effect that’s amazingly similar to an income tax.
    Unless Trump was actively looking to start a bun fight over this, he messed up “big league” on this business with state income taxes.

  13. High tax states and municipalities are actively looking for ways to mitigate the limits on federal deductions for SALT beyond this litigation tactic. I agree than litigation doesn’t stand a chance of working. The idea of switching donations for tax assessments is not a new tactic. That has been a limited option for some richer folks in some locales. However the IRS keeps a close eye on this and is often quick to disallow the tactic. In order for this to work, the state legislatures will have to devise some ironclad laws and procedures to stand up to the IRS. Finding ways to manipulate the federal tax code is an old profession.
    If the states do find a way around the federal limits on SALT deductions, the federal budget and the deficit will take another huge hit. It will definitely move towards the GOP goals of limited federal government and expanded states rights. Of course, it’ll surely bite the Democrats in the ass when they are in charge of the government again.

  14. Frank says:

    The CIA traffics narcotics. Go ahead and remove this fact

  15. turcopolier says:

    What is your evidence that this is true? Someone’s pot boiler book sold to all your crowd? What is it in your background that makes you want to believe every nut with a publisher? pl

  16. LeaNder says:

    Never underestimate how deep into the sewer a lawyer will go.
    rings a bell on my mind, TV.

  17. LeaNder says:

    But, I have to add. I am not sure if we would agree on the special case issue. 😉

  18. Bill H says:

    Dean Baker is proposing that high tax states, such as New York, rescind their income tax and instead tax employers on their payroll. Employees would be paid less, but would be enriched by having to pay no state income tax and, since their income would be lower, would pay less federal income tax.
    He doesn’t mention property taxes, and I think his math which enriches the employee is a little shaky. He is big on “free lunch” plans, such as if service on the federal debt becomes burdensome due to rising interest rates we can save money if we “buy back government debt at a discount.” The math on that one certainly doesn’t work, since the only way the government gains is for the holder of the debt to lose on the sale.

  19. Fred says:

    ” Employees would be paid less, but would be enriched by …”
    I notice he hasn’t said the State of NY should stop spending so much money.

  20. Frank says:

    Iran Contra. Oliver North. Plausible deniability…
    There is also Gary Webb, or even Michael C. Rupert of the LAPD.
    Which nut with a publisher would you blame for all of that?
    Or perhaps I should just rest easy because they don’t engage in those sorts of activities anymore.
    And what exactly do you suppose the CIA is doing in a country where 90% of the world’s heroin is produced and exported?

  21. turcopolier says:

    CIA did not have much of anything to do with decisions on Iran-Contra policy or Ollie North’s madcap adventures. . That nonsense was cooked up in the WH of the day and CIA was ordered to carry out the policy. They are in Afghanistan because they were sent there by the national command authority. You actually don’t know anything about government do you? a waste of time talking to you. pl

  22. blue peacock says:

    Col. Lang
    The Trump/GOP tax plan is finally starting to make a dent on the massive tax giveaways to the 0.01% by limiting the mortgage & state income tax deduction. Yes, this disproportionately hits high tax Democrat states. Hopefully this will get voters in those states to either vote with their feet or get more fiscal conservatives voted into their legislatures.
    IMO, the biggest element of the Trump tax plan is the reduction in the corporate tax rate which will start to level the playing field for small business. The effective rates for big business have always been much lower as they can afford the armies of tax attorneys and lobbyists to create and take advantage of special loopholes. The effective tax rate for Intel in the last quarter was 16%. GE hardly pays any tax. Small business have always been disadvantaged by our tax laws.
    IMO, we should move towards a consumption & asset tax and eliminate the income & payroll tax altogether on individuals & businesses. The asset tax would be progressive as those with more wealth will pay more but simple to administer as it would a flat tax rate on everyone. There will be no loopholes as all assets (stocks, bonds, cash, real estate, ownership in pass-thrus, etc) will be tallied up.

  23. Jubal says:

    The IRS and the US income tax system is a classic example of US myopia.
    Americans are incredibly insular and have a narrow view of how state power “must” function. Other examples are health insurance being made an employer’s obligation, or disaster response being a federal responsibility. In the US the federal government has seized control of entire swathes of American existence from the moment of its inception.
    In the case of the Income Tax, aside from it being as criminally Marxist as it is, the 16th ammendment should have authorized each state to enforce income taxes within their own state, with the federal government receiving the same precentages from all states equally. Each state would have its own strong motivation for efficient collection so the feds would get their cut. By having each state collection mechanism separate, citizens would be able to change tax collection systems entirely merely by changing states. The states would have to compete against each other, instead of forcing everyone to go through the same incredibly unresponsive, arrogant, lying, cheating (Lois Lerner’s dog ate her emails), and corrupt organization in the US government. The states would benefit by having far more sovereignty because the same concept should extend to other branches of the US government. Enforcement should lie with the states. Get rid of all the dead weight and especially the goons in the swat teams of Education, Energy, BLM, IRS, HUD.
    Most of all, there is no reason why Americans should be forced to expatriate just to escape from the criminally co-opted IRS.

  24. Edward Amame says:

    Col Lang
    Here are two columns in very conservative publications by writers who think that eliminating the deductibility of state and local taxes isn’t such a great idea.
    Tax ‘Reform’: Don’t Pinch the SALT deduction
    Remember, the state and local tax deduction enables federalism

  25. Matthew says:

    Fred: It’s really a question of who subsidizes whom.
    The high tax states provide the services and then ask the remaining states to carry the load by allowing the high-tax states to reduce their state taxes from their federal taxes.
    Seems like an unavoidable problem of federalism to me. Of course, the Tri-Staters always tell us rubes in flyover country that they are smarter than us, so I’m sure they’ll figure it out.

  26. turcopolier says:

    Edward Amame
    “Enables federalism?” A threat to secede? Be still my heart. pl

  27. Edward Amame says:

    Col Lang
    No, like red states sued to stop Obamacare from reorganizing their health care systems, blue states may try the same thing with regards to the elimination of the SALT deduction. Blue states probably won’t succeed, but what about Republicans’ reputation as the party that cares about federalism/states’ rights?

  28. turcopolier says:

    “Secede,” not succeed. pl

  29. Tosk59 says:

    Re state and federal tussling on taxes, in NY Cuomo proposing a “healthcare insurance windfall profit fee”, see: http://bit.ly/2FjLPiq Seems rather scummy!
    ”… a 14% tax on the gains of private health insurance companies. In his budget address, Governor Cuomo explained that the tax is intended to recapture the “windfall” insurance companies will receive as a result of the Federal tax rate reduction from 35% to 21%.

  30. LeaNder says:

    The CIA traffics narcotics. Go ahead and remove this fact
    Frank, are you real? I have a hypothesis, why you might bring up the issue. Basically I was sympathetic to the idea of linking ‘The War on Drugs’ with the ‘War on Terrorism’ in the early 9/11 universe.
    The problem with Rupert, was that his ideological background and perspective seemed to keep him from seeing and understanding the reality unfolding around him. Could he otherwise have seriously trusted that a single informer willing to meet him in Canada might not be that “hot” after all, helping him to unravel the secret behind 9/11? I watched that close up. Stunning experience. I guess must have been a secret operation?
    Kris Milligan, one of the most confused persons on earth I ever met, never mind his followers, was apparently the first organizer of a CIA-Drugs Symposium/συμπόσιον in Oregon, by the way. His enemies were everywhere, ironically on the left often. He challenged reference to the neocons and reference to the clean break paper but also allowed someone to publish “the Protocols”.
    And here we have arrived in the big American ideological melting pot more then a decade later that Kris blog introduced me to.

  31. Eric Newhill says:

    Tosk59 #29
    New York under democrat leadership is going to hell in a hand basket. 33% of new Yorkers are on government assistance. 33% work for the govt and 33% are employed in the private sector and, thus, paying for the other 66%. The tax burden on the private sector is incredibly high and rising. Additionally, there is a huge bureaucratic regulation maze that all attempting to do anything must navigate and that system is replete with fees and fines. Business and capable private sector individuals are fleeing the state in increasing numbers to lower tax/lower regulation states. The result being an increased tax burden on those who stay.
    As for healthcare itself, the state already imposes excessive regulation and unusual fees on insurance companies relative to other states. Like business killing taxes and regulations, this latest move is going to reduce choice and increase cost for consumers of healthcare insurance. When that happens, Cuomo will blame it on the insurance companies and the soulless/mindless idiots that like socialism will agree and Cuomo will roll out some state based plan that furthers the status of NYers as wards of the state and further drives competent people away. At the end of the day Cuomo and his ilk will be king of turd island, but hey, at least he gets to be king. Isn’t that the true goal of every socialist leader?
    In fact everything Cuomo and cronies do is all about maintaining personal power as feudal lords presiding over a collection of dependent surfs. The more illegals and new immigrants the better because these people tend to be more dependent on the beneficence of the feudal lord democrats. The theory seems to be that deplorable upstaters can F’ off and die or move or whatever and be replaced by dependent people relocated from NYC; like refugee camp ghettos (see towns like Amsterdam,NY). Meanwhile, the Big Apple is deemed to big to die from infliction of these horrid policies.
    IMO, democrats in CA have about the same approach.

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