US Supreme Court Ruling on Federal Income Tax - Essay Example

This culminated in the annulment of the federal Income Tax Act of 1894, by the United States Supreme Court, on constitutional grounds. The Court held the levy imposed by the law on the returns from real estate was not sufficiently different from the taxes remitted by the property owners on the same assets.

The court, therefore, categorized the duty as a direct tax, which should be apportioned among the different States. This ruling set a remarkable precedent, that, although, not all income taxes amounted to direct taxes; however, it was still unclear whether the income tax fell in either category of taxes. Regardless, the income tax was believed to be illegal because Congress had not yet streamlined the Sixteenth Amendment to be in tandem with the taxation laws. Federal authorities in charge of income tax based their arguments on the fact that the passage of the Sixteenth Amendment permitted the government to implement income taxes.

Additionally, the court concluded that the enactment of such a law would be a recipe for chaos between different social classes. Nonetheless, the ruling prompted Congress to correct the ambiguous issue by ratifying a Constitutional amendment. Shortly after the passing of the Amendment, the legislature enacted another legislation governing income tax; a legal structure, which was largely drawn from the 1894 law. It was, however, clearer on both taxes.