The founders built a structural limit on federal taxing power, a restriction the Progressive Era removed. The government that followed was not a coincidence.
The 16th Amendment, ratified Feb. 3, 1913, gave Congress the power to tax income “from whatever source derived, without apportionment among the several states.” Those 23 words eliminated the constitutional constraint that Pollock v. Farmers’ Loan and Trust Co. (1895) had enforced: an income tax on investment income was a direct tax requiring apportionment by population, a structural protection the founders had written into the original Constitution with specific intent.
The 1913 calendar is instructive. February brought the 16th Amendment, removing the fiscal constraint on federal taxation. April brought the 17th Amendment, transferring Senate elections from state legislatures to direct popular vote — eliminating the states’ institutional voice in the federal legislative process. December brought the Federal Reserve Act. Three structural changes in a single year. The income tax provided the revenue. The direct Senate election removed the mechanism through which states could have opposed federal expansion. The combination reshaped American governance in ways the individual reforms, considered separately, do not explain.
WHAT VOTER ROLL INTEGRITY ACTUALLY REQUIRES
The Revenue Act of 1913 implemented the new income tax carefully: 1% on net income above $3,000, roughly $90,000 today, with a graduated surtax topping out at 6% on income above $500,000. The amendment’s architects promised a modest, targeted revenue tool aimed at the very wealthy. That promise had a short shelf life. The top marginal rate reached 94% during World War II, remained above 90% through 1963, and today sits at 37% — still 37 times the original ceiling. The tax code now exceeds 70,000 pages. Federal spending has risen from roughly 2% of gross domestic product in 1913 to more than 24% today. The amendment authorized a revenue instrument. The administrative state conservatives rightly object to was built on its proceeds.
That trajectory is the argument conservatives consistently understate. The fight against the administrative state focuses on regulatory authority: the agencies, the rules, the unaccountable administrative law judges, the guidance documents that function as binding law. Those are real problems worth fighting. But the regulatory apparatus rests on a fiscal foundation. Agencies require appropriations, programs require funding, a permanent administrative class requires salaries. All of it requires revenue at a scale the apportionment requirement would have constrained, and the 16th Amendment made constitutionally available.
The differential between ordinary income and capital gains rates is the amendment’s most operationally significant dimension for anyone managing capital. Thirty years advising ultra-high-net-worth families on private equity and private credit has made that distinction concrete: it determines after-tax returns, shapes fund structures, and drives the carried interest debate Congress revisits without resolving. The 16th Amendment created the framework. Every subsequent argument about how it applies is an argument about what “income” means — and that question is not settled.
The Supreme Court‘s 2024 decision in Moore v. United States confirmed as much. The court upheld the mandatory repatriation tax on accumulated offshore corporate earnings but declined to say whether Congress can tax unrealized gains as income. Wealth tax proposals advanced in recent Congresses require an affirmative answer to that question. My clients with significant illiquid private holdings — no liquid market, no distributed cash — face the prospect of annual taxation on paper appreciation they haven’t received. Moore left the constitutional question open. The next case won’t.
The scale of that fiscal consequence is concrete. Federal spending in 1913 was roughly 2% of GDP. Today it exceeds 24%. The agencies, the transfer programs, the permanent administrative class — none of them exist without the revenue base the 16th Amendment created. Conservatives who successfully constrain regulatory authority while leaving fiscal capacity untouched are winning arguments in the margins. The 16th Amendment is the foundation. West Virginia v. EPA addressed the regulatory architecture. Moore v. United States is the opening on the revenue side.
What the apportionment requirement actually prevented is worth naming clearly. A federal government required to distribute its tax burden proportionally across states by population couldn’t concentrate that burden on particular income sources or activities. The graduated income tax the Progressives wanted — higher rates on higher incomes — was constitutionally impossible under apportionment. Removing that constraint didn’t just allow a modest revenue tool. It allowed a revenue system that could be progressively calibrated to whatever political coalition controlled Congress. That’s the machinery the administrative state runs on.
The definitional question Moore left open — whether unrealized appreciation is income for constitutional purposes — isn’t academic for Washington Examiner readers. Every investor, every business owner with illiquid equity, every farmer whose land has appreciated for decades without being sold faces annual taxation on paper gains if the court eventually says Congress can reach unrealized appreciation. The constitutional argument against that isn’t a tax avoidance strategy. It’s the same structural argument the founders made about apportionment: federal taxing power needs a defined limit.
NO-SHOW CONGRESS: WEEKEND AT BERNIE’S MOVES TO CAPITOL HILL
Conservatives who want a smaller federal government have two constitutional tools available: constrain what the government can spend or constrain what it can tax. The spending argument is well-rehearsed and has produced modest results. The revenue argument — what the 16th Amendment actually authorizes and what it doesn’t — is less often made and increasingly necessary.
Moore v. United States is the opening. The question of what constitutes income under the amendment is both important and under-litigated. That’s a combination worth noticing.
Jay Rogers is a financial professional with more than 30 years of experience in private equity, private credit, hedge funds, and wealth management. He has a BS from Northeastern University and has completed postgraduate studies at UCLA, the University of Pennsylvania, and Harvard. He writes about issues in finance, constitutional law, national security, human nature, and public policy.