Pollock v. Farmers Loan and Trust

The Court struck down a federal income tax as an unapportioned direct tax, a ruling later reversed by the Sixteenth Amendment.

Overview

Congress enacted a modest peacetime income tax in 1894, and shareholders sued banks to stop payment. By a 5-4 vote, the Court held that taxes on income from property were direct taxes that must be apportioned among the states by population, a requirement making such taxes practically impossible. The ruling invalidated central federal revenue policy and ignited populist fury at the Court. Progressive criticism of Pollock fueled the ratification of the Sixteenth Amendment in 1913, which expressly authorized income taxes without apportionment and transformed the federal fiscal system.