The 16th Amendment: A Transfer of Power from the States to the Federal Government
By Randall Holcombe • Tuesday February 12, 2013 2:24 PM PDT • 9 Comments
This is the centennial year of the 16th Amendment — the income tax amendment — which was ratified in 1913. While often associated with the growth in government spending, its biggest effect has been to shift the balance of power toward the federal government and away from the states.
It is not difficult to imagine that the scope of government at all levels might not be much different than it is today. State income taxes predated the federal income tax (Wisconsin voters approved an income tax in a state-wide referendum in 1908), and most states have their own income taxes. Without a federal income tax, surely state income taxes would be higher, and states would have adopted many of the programs now undertaken by the federal government. Looking at the individual nations in the European Union as an example, they established their own government health care programs, retirement programs, unemployment compensation, and so forth.
There would be differences among the states, as there are differences among the nations of Europe, in their programs, but with a weaker federal government, the same political forces that have created those programs in Europe, and at the federal level in the United States, would have created those programs at the state level if the federal government remained constitutionally limited in its ability to raise revenue.
Perhaps the biggest difference a revenue-constrained federal government would have made is that it would have limited the ability of the United States to extend its military might across the world. The nation’s role in the two World Wars would have been different; perhaps even nonexistent. The Cold War might have played out differently. In the area of military power and international affairs, the effect of the 16th Amendment is so great that it is difficult to conjecture how things might be different today without it.
But domestically, it would appear naive to suggest that if the federal government weren’t exercising the power it does today, that states would not have expanded their power to fill that void. I know many readers of The Beacon favor much more limited government, but one only has to look at the recent presidential election to see where popular opinion lies.
The most unambiguous result of the passage of the 16th Amendment is the shifting of power from the states to the federal government.
Tags: American History, Budget and Tax Policy, Constitution, Defense, History, Politics, Progressivism, Taxation, The State 
On the other hand, the difference in tax policies among the several states would become clearer if the federal government were tiny. People might be more willing to vote with their feet between a tax-and-spend state and a more fiscally restrained, whereas today the difference between living in California and living in Washington or Oregon is somewhat dampened, since we all pay federal taxes.
Anthony Gregory | Feb 12, 2013 | Reply
One cannot understand why there is an Income Tax ,on the Federal level,without first going into the creation of the Federal Reserve Banking and Money system. If you study history,one would find the creation of the Federal Reserve at almost the same moment as the passing of the 16th Amendment Income Tax. The Federal Reserve,which is neither Federal nor has any reserves,is a banking cartel set up to create money out of thin air whenever the Federal Government needs revenue. Basically you have a system of Federal Debt Bonds created out of thin air backing paper bank notes and computer entries created out of thin air buying real goods and services created in the market. Real goods and services require capital,good management,labor and production. Paper bank notes require a printing press,a computer and legal tender laws to create a money monopoly. One of the 2 main problems with fiat currency backed by debt is inflation,due to overprinting,and,at the same time,a growth of an enormous National Debt. The Federal Income Tax helps to solve these problems by taxing back the purchasing power of the American Consumer,which to a certain extent,controls inflation by having less money in circulation. And by the government having the power to collect the interest due the bankers by taxing people directly. In essence the IRS and the Income Tax are the collection agencies for the Federal Reserve Banking Cartel. This symbiotic relationship between the politicians and the bankers works well for the Political Class and the money interests but is a disaster for the productive Economic Class. What has happened is that the politicians have put Americans deeply into debt and is using the future earnings of the American people as collateral. In the end,the Income Tax is a claim check on the future earnings of all productive citizens including the unborn. In essence the Income Tax makes Debt serfs out of a once free people. If you could abolish the Income Tax and the Federal Reserve fiat money mill then,in one stroke,you would force the Federal Government to live within it’s fiscal restraints and at the same time release from the American People the yoke of a National Debt. Unfortunately I don’t think those events will happen anytime soon.
libertarian jerry | Feb 12, 2013 | Reply
Thanks for the comments, Anthony and jerry. Anthony, I fully agree that intergovernmental competition can have a constraining effect on governments, and that the 16th Amendment has reduced intergovernmental competition. But my perception is that when most people consider the 16th Amendment, they don’t realize the degree to which it has weakened state governments. That was the motivation for my post.
Randall Holcombe | Feb 13, 2013 | Reply
One should read “The Law That Never Was” by Martin Beckman & William Benson, before nonchalantly referring to the ratification of the 16th Amendment.
pk lowrey | Feb 18, 2013 | Reply
When the current federal government finally self-destructs — likely with great calamity rather than going softly into the night — will the country be destroyed as collateral damage or will the country experience the benefits of having been given a new lease on life?
Tom | Feb 19, 2013 | Reply
The states were originally seen as separate nation states similar to Europe. As such they could be laboratories for policies and programs. Residents could vote with their feet and other states could learn from mistakes and failures.
Generally speaking, societal problems are local and the solutions to those problems can be understood and addressed more fully by local organizations with mainly financial assistance by state and local governments.
Mike McCurdy | Feb 19, 2013 | Reply
One major difference between Federal spending and the several States is the existence of the Federal Reserve Bank, which allows deficit spending.
The change in election of Senators to direct rather than by State Legislatures occurred at the same time, and also eroded the power of the States.
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ChinaDatt | Mar 5, 2013 | Reply