# Pollock v. Farmers' Loan and Trust Company (1895) ***Pollock v. Farmers' Loan and Trust Company*** is the 1895 Supreme Court decision that struck down the federal income tax enacted in 1894 as an unapportioned "direct tax," and in doing so made a national income tax constitutionally impossible until the [[Sixteenth Amendment]] overrode it in 1913. It was decided twice — an 8-member Court split 4–4 on the central question on **April 8, 1895**, and after rehearing a full Court struck the whole tax **5–4 on May 20, 1895**, Chief Justice Melville Fuller writing. It matters for the KB as the [[Gilded Age]] Court's most consequential intervention on behalf of accumulated wealth: the [[Panic of 1893]] had produced a Democratic Congress that tried to shift part of the federal burden from tariffs on consumers to a tax on the incomes of the rich, and the Court removed the tax within a year of its passage. Justice Henry Billings Brown's dissent called the result "the surrender of the taxing power to the moneyed class." ## Background Until the Civil War the federal government lived on tariffs and excises. A wartime income tax ran from 1861 to 1872, and the Court had twice defined "direct taxes" — which Article I requires to be apportioned among the states by population — narrowly, as capitation taxes and taxes on land (*Hylton*, 1796; *Springer*, 1881). Industrialization created a class of income — dividends, interest, rents — that tariffs never touched, and the [[Populist Party]] made a graduated income tax a central demand. After the [[Panic of 1893]], [[Grover Cleveland]]'s Democrats moved to lower the tariff. The **Wilson–Gorman Tariff Act**, which became law on August 27, 1894 (without Cleveland's signature — Senate amendments had gutted the tariff cuts), paired the reductions with a **2% tax on incomes above $4,000**, a threshold high enough to reach only the top fraction of earners. Business opposition branded it class legislation. ## The Case Lawyer William D. Guthrie engineered a test case: Charles Pollock, a shareholder in the Farmers' Loan and Trust Company, sued to stop the company from paying the tax, which let the challenge reach the Court before the tax was collected. Argument was heard in March 1895. **First decision, April 8, 1895 (157 U.S. 429).** With Justice Howell Jackson absent through illness, the Court held that a tax on income from *real estate* was a direct tax requiring apportionment, and that a tax on state and municipal bond interest was invalid — but divided 4–4 on whether a tax on income from personal property, and on income generally, was direct. **Rehearing, May 20, 1895 (158 U.S. 601).** Jackson, terminally ill, returned. The Court held 5–4 that taxes on income from personal property were also direct taxes, and that since the invalid portions could not be severed, the entire income tax fell. Majority: Fuller, Field, Gray, Brewer, Shiras. Dissenting: Harlan, Brown, Jackson, White. [[John Marshall Harlan]]'s dissent, read from the bench with unusual force, said the decision "strikes at the very foundations of national authority" and left the wealthy, who drew "enormous incomes" from rents, bonds, and stocks, untaxed while wage-earners paid "directly from their earnings" through tariffs and excises. ## Aftermath Congress did not attempt another income tax until 1909, when the Sixteenth Amendment was proposed — by a coalition of Democrats and progressive Republicans, and with Senate approval 77–0. Ratification came in February 1913, and the Revenue Act of 1913 restored the tax at rates of 1% to 7%. *Pollock* was effectively overruled by constitutional amendment rather than by the Court; the [[Sixteenth Amendment]] page carries the ratification fight and the later right-wing campaign against it. ## Why It Matters - **The Court as the last line for capital.** In the same two-year stretch, the Court struck the income tax (*Pollock*), gutted the [[Sherman Antitrust Act]] against manufacturing trusts (*E. C. Knight*, 1895), and upheld the injunction that broke the [[Pullman Strike]] (*In re Debs*, 1895). The three together are the judicial half of the [[Gilded Age Plutocracy]]. - **The apportionment argument never died.** The claim that income taxation is a "direct tax" beyond federal power survives on the constitutional right, and the "direct tax" clause returned in the 2024 wealth-tax litigation (*Moore v. United States*). *Pollock* is the precedent those arguments reach for. - **The Panic's fingerprint.** The tax existed only because the [[Panic of 1893]] forced a tariff-revenue trade-off; the Court's answer meant the depression's cost stayed on consumers and wage-earners, which fed the [[William Jennings Bryan]] insurgency of the [[1896 Presidential Election]]. ## See Also - [[Sixteenth Amendment]] · [[Income Tax]] · [[Tax History Timeline]] · [[American Tax History]] - [[Panic of 1893]] · [[Grover Cleveland]] · [[Populist Party]] · [[Pullman Strike]] - [[Gilded Age]] · [[Gilded Age Plutocracy]] · [[Sherman Antitrust Act]]