The constitutional character of the tax, when levied without apportionment among the States of the Union, was once more fully argued out in the Supreme Court, which in 1880 reaffirmed its decision of 1789, that a tax on incomes was not a direct tax.  Some fifteen years later, however, the question emerged again, and in a crucial form.  The Democrats came into power in 1893, and proceeded to reduce the tariff, relying upon a tax of 2 per cent. on all incomes of over $4,000 to make good the expected loss of revenue.  The Supreme Court in 1895 shattered all their fiscal plans and policies by pronouncing the income tax to be a direct tax, and therefore incapable of being levied, except in strict proportion to the population of the various States, and therefore, in effect, incapable of being levied at all.

That decision, in all its absurdity, has stood ever since.  Its consequences were to deny to the United States Government the right to tax incomes, to restrict it still further to customs duties as virtually its sole source of revenue, to deprive it of a power that might one day be vital to the safety of the Union, and to exhibit it in a condition of feebleness that was altogether incompatible with any rational conception of a sovereign State.  It is true that the Supreme Court has changed not only its personnel, but its spirit, and its whole attitude toward questions of public policy, since 1895.  It has more and more allowed the influence of the age and the necessities of the times and the clear demands of social and economic justice to moderate its decisions; and had the question of an income tax been brought before it any time in the last five years, it would probably have reversed its judgment of 1895.  But President Taft was undoubtedly right when he urged, in 1909, that the risk of another adverse decision was too great to be run, and that the safer course was to proceed by way of an amendment to the Constitution.

The mere passing of the Income Tax amendment did not, however, establish an income tax.  It merely authorized the government to do this at will.  President Wilson’s administration was prompt to take the matter up.  The Democrats, in conjunction with their reduction of the tariff, needed a new source of revenue.  So in October of 1913 the Income Tax law was passed.  In theory an Income Tax is obviously the most just of all taxes.  It summons each citizen to pay for the government in proportion to his wealth; and his wealth marks roughly the amount of government protection that he needs.  In practise, however, the working out of an income tax is so complex that every grumbler can find in its intricacies some cause of complaint.  The present tax is therefore described here by an expert statistician, Mr. Joseph A. Hill, the United States Government official at the head of the Division of Revision and Results of the Census Bureau in Washington.