Brushaber v. Union Pacific Railroad
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| Brushaber v. Union Pacific Railroad | ||||||||
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| Image:Seal of the United States Supreme Court.png Supreme Court of the United States | ||||||||
| Argued October 14 and 15, 1915 Decided January 24, 1916 | ||||||||
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| Holding | ||||||||
| The Sixteenth Amendment of the United States Constitution makes it unnecessary to decide whether an income tax is a direct or indirect tax, since the amendment specifically exempts income taxes from any apportionment requirement. (Prior to the passage of the amendment, if an income tax was determined to be direct, it had to be apportioned among the states according to their populations.) Congress may tax categories of income, or exempt categories of income from taxation as they wish, without running afoul of the due process clause. Dismissal by the District Court affirmed. | ||||||||
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| Laws applied | ||||||||
| U.S. Const. Amend. XVI |
Brushaber v. Union Pacific Railroad, 240 U.S. 1 (1916), was a landmark United States Supreme Court case in which the Court upheld the validity of a statute, enacted pursuant to the newly ratified Sixteenth Amendment to the United States Constitution, imposing a federal income tax. The Court ruled that Congress had, even before the Sixteenth Amendment was passed, the authority to tax income. If the income tax was a direct tax in the constitutional sense, it could be imposed (before the passage of the Amendment) only by apportionment among the states according to their census populations. In the controversial case of Pollock v. Farmers' Loan & Trust Co. the Court had overturned longstanding precedent and ruled that a tax on income derived from property was a direct tax. In Brushaber, however, the Court held that the Sixteenth Amendment eliminated the requirement of apportionment as it relates to "taxes on incomes, from whatever source derived" and thus eliminated the need to determine whether the income tax was a direct tax or, alternatively, an excise (an indirect tax).
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Facts
The plaintiff in this case, Frank R. Brushaber, was a stockholder in the defendant Union Pacific Railroad company. The Sixteenth Amendment had recently been passed, and the U.S. Congress had enacted legislation pursuant to the amendment assessing taxes to the wealthiest of income earners, including the railroad company in this case. Brushaber brought a lawsuit against the railroad company to enjoin it from paying the tax, on the contention that statute enacting the tax violated the Fifth Amendment's prohibition against the government taking property without due process of law, and further contending that the statute further violated due process by exempting certain kinds of income.
Holding
After quoting the language of the Sixteenth Amendment, the Court states:
It is clear on the face of this text that it does not purport to confer power to levy income taxes in a generic sense,—an authority already possessed and never questioned,—or to limit and distinguish between one kind of income taxes and another, but that the whole purpose of the Amendment was to relieve all income taxes when imposed from apportionment from a consideration of the source whence the income was derived. Indeed, in the light of the history which we have given and of the decision in the Pollock Case, and the ground upon which the ruling in that case was based, there is no escape from the conclusion that the Amendment was drawn for the purpose of doing away for the future with the principle upon which the Pollock Case was decided; that is, of determining whether a tax on income was direct not by a consideration of the burden placed on the taxed income upon which it directly operated, but by taking into view the burden which resulted on the property from which the income has derived, since in express terms the Amendment provides that income taxes, from whatever source the income may be derived, shall not be subject to the regulation of apportionment. . . .
Later misunderstanding
Although the case is clear in its statement that the income tax is constitutional, and need not be apportioned, it has been misunderstood by tax protesters, who have unsuccessfully tried to cite Brushaber as having the opposite meaning. Although they are correct in stating the Court's finding that the Sixteenth Amendment gave "no new power to tax," this is not because the amendment was ineffective. Instead, the Court merely found that Congress always had the power to tax incomes, and that the amendment only affects the way that such taxes must be apportioned.
Indeed, later in the same year the Court stated in Stanton v. Baltic Mining Co., 240 U.S. 103, 112-13 (1916), that Brushaber had determined
- that the provisions of the 16th Amendment conferred no new power of taxation, but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged, and being placed in the category of direct taxation [ . . . . ]
External link
- Template:Ussc – Full text of the case at FindLaw