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Brushaber v. Union Pacific Railroad

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Brushaber v. Union Pacific Railroad

Supreme Court of the United States

Argued October 14 and 15, 1915

Decided January 24, 1916

Full case name: Frank R. Brushaber v. Union Pacific Railroad Company
Citations: 240 U.S. 1, 36 S.Ct. 236, 60 L.Ed. 493
Prior history: Dismissed by the District Court for the Southern District of New York
Subsequent history: none
Holding
The Sixteenth Amendment of the United States Constitution makes it unnecessary to determine the source of income, which was previously required in order to tax with apportionment. 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.
Court membership
Chief Justice Edward Douglass White
Associate Justices Willis Van Devanter, Oliver Wendall Holmes, James C. McReynolds, Joseph McKenna, William Rufus Day, Mahlon Pitney, Charles Evans Hughes (the Court decided the case with only eight justices sitting, due to the death of Joseph R. Lamar on January 2, 1916)
Case opinions
Majority by: White
Joined by: unanimous court
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 the statute enacting the federal income tax passed pursuant to the newly ratified 16th Amendment to the United States Constitution. Brushaber holds 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 was subject to the requirement of apportionment. The Sixteenth Amendment eliminated the requirement of apportionment as it relates to "taxes on incomes, from whatever source derived."

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.

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