The Wilson Gorman Tariff Act implemented, amongst others, a income tax on property. The Farmer’s Loan & Trust Company notified its clients that in compliance with the law they would pay the taxes on their clients behalf and notify the government of its clients liabilities. Charles Pollock, of Massachusetts, sued Farmer’s Loan & Trust and lost in lower court, but prevailed in the Supreme Court. The court ruled that tax on income from property was a direct tax and as a direct taxes were required to be levied in proportion to the states’ population or they were not legal.
Significance:
- Declared direct taxation without apportionment to the states based on population was unconstitutional
- Prevented Progressive Taxation and hence any income tax that was not a flat rate limiting the income tax to one bracket.
- Limited income taxes to essentially flat taxes until the ratification of the 16th Amendment in 1913.
