Historical Insights On The Meaning Of “Income” May Preserve The Income Tax

Donald Tobin (Maryland; Google Scholar) & Ellen Aprill (Loyola-L.A.; Google Scholar), The Taxing Question of Income: Historical Insights on the The Taxing Question of Income: Historical Insights on the Meaning of “Income” May Preserve the Income Tax Meaning of “Income” May Preserve the Income Tax, 84 Md. L. Rev. Online 1 (2024):

Economists, accountants, and lawyers in the early Twentieth Century all defined income in broad terms, embracing the definition of income as more than money income and including unrealized gain. The legislators who passed the Sixteenth Amendment also envisioned a broad definition of income and clearly understood the word income to include unrealized income. Those legislators were familiar with the income tax statutes that existed before and directly after ratification that taxed unrealized gain. During the period of time near the enactment of the Sixteenth Amendment, prominent critiques of a particular tax act or statutory provision, including the extent to which a tax act did or should tax unrealized gain, were arguments about legislative policy decisions, not the reach of the power granted to Congress in the Sixteenth Amendment.

Key to understanding the word income in the Sixteenth Amendment is understanding the way professionals and scholars in the field were using the term. Article I and the Sixteenth Amendment provide Congress with broad taxing authority. Congress should exercise good judgment in legislating, but the Constitution places that responsibility with Congress, not the courts. In deciding Moore, the Court should neither usurp congressional power nor substitute its judgment regarding tax policy for that of Congress by creating a limited definition of income.