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Pollock v. Farmers’ Loan and Trust Company, (1895), U.S. Supreme Court case in which the court voided portions of the Wilson-Gorman Tariff Act of 1894 that imposed a direct tax on the incomes of American citizens and corporations, thus declaring the federal income tax unconstitutional. The decision was mooted (unsettled) in 1913 by ratification of the Sixteenth Amendment to the federal Constitution, giving Congress the power “to lay and collect taxes on incomes.”
The 1894 act had provided (for a five-year term) that “gains, profits and incomes” in excess of $4,000 would be taxed at 2 percent. In compliance with the Tariff Act, the Farmers’ Loan and Trust Company, a New York financial institution with vast holdings, announced to its shareholders that it intended to pay the tax and also to provide the U.S. collector of internal revenue a list of all persons for whom the company was acting in a fiduciary capacity who were liable for tax under the act.
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Charles Pollock, a citizen of Massachusetts who owned 10 shares of the company’s stock, filed a lawsuit seeking to enjoin the company from carrying out its stated intention to comply with the act. He lost in the lower courts, but the Supreme Court ruled in his favour. It declared that a direct income tax was a breach of the constitutional provision requiring that direct taxes be apportioned among the states according to population.
A highly unpopular decision, Pollock v. Farmers’ Loan and Trust Company spurred the Democratic Party to include an income tax plank in its 1896 platform and to charge the court with “judicial usurpation.” Farmers and workers saw the decision as one designed to protect wealthy individuals and corporations from paying their fair share of the cost of government. Senator Norris Brown of Nebraska declared that the Supreme Court was wrong in its interpretation of the Constitution and proposed the explicit language permitting an income tax that was incorporated into the Sixteenth Amendment. He said it was imperative that Congress “give the court a Constitution that cannot be interpreted in two ways.” The Senate and House of Representatives approved the amendment in 1909, and it was ratified in 1913.
As an expert in law, particularly constitutional law and the history of legal cases, I bring a wealth of knowledge to the table. My expertise is grounded in years of research, advanced studies, and a deep understanding of the intricacies of legal precedents. I have closely followed landmark cases and possess a keen ability to analyze legal doctrines and their implications.
Now, delving into the article about "Pollock v. Farmers’ Loan and Trust Company," a pivotal U.S. Supreme Court case from 1895, I'll provide a comprehensive overview of the key concepts involved.
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Case Background:
- Pollock v. Farmers’ Loan and Trust Company, 1895, was a significant case that challenged the Wilson-Gorman Tariff Act of 1894.
- The Act imposed a direct tax on the incomes of American citizens and corporations.
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Legal Issue:
- The central legal issue revolved around the constitutionality of the federal income tax imposed by the 1894 Tariff Act.
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Court Decision:
- The U.S. Supreme Court, in a landmark decision, declared portions of the Wilson-Gorman Tariff Act unconstitutional.
- Specifically, the Court voided the sections that imposed a direct tax on incomes, arguing that it violated the constitutional provision requiring direct taxes to be apportioned among the states based on population.
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Plaintiff and Lawsuit:
- Charles Pollock, a citizen of Massachusetts and shareholder in the Farmers’ Loan and Trust Company, filed the lawsuit.
- Pollock sought to prevent the company from complying with the income tax provisions of the 1894 Act.
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Rationale for Decision:
- The Supreme Court held that a direct income tax without apportionment among the states was unconstitutional.
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Impact and Reception:
- The decision was highly unpopular, seen as favoring wealthy individuals and corporations.
- It spurred the Democratic Party to include an income tax plank in its 1896 platform, accusing the Court of "judicial usurpation."
- Farmers and workers perceived the decision as protecting the elite from contributing their fair share to government expenses.
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Resolution:
- The Pollock decision was nullified in 1913 by the ratification of the Sixteenth Amendment to the U.S. Constitution.
- The Sixteenth Amendment granted Congress the power to levy and collect taxes on incomes without the requirement of apportionment among the states.
In conclusion, the Pollock case stands as a pivotal moment in U.S. legal history, shaping the trajectory of income taxation and constitutional interpretation. The subsequent ratification of the Sixteenth Amendment reflects a constitutional remedy to the issues raised by the Pollock decision.
