“The chief argument which was responsible for the passage of the Sixteenth Amendment and for the enactment of the law was, as we have elsewhere pointed out [Seligman, The Income Tax, 1911, p. 640], that wealth is escaping its due share of taxation. … It is true that some of the more extreme supporters of the income tax based their advocacy on the ground of opposition to the tariff alone; but the more influential legislators did not tire of stating that, far from purposing to make an attack on wealth as such, their aim was solely to redress the inequality of taxation which was a predominate feature of the American fiscal system as a whole. [Cf. Congressional Record, 63rd Congress, 1st sess., pp. 4260-4261, Aug. 28, 1913.] . . .
In the discussion of the present bill Mr. Cordell Hull, its framer, stated: “In construing all these laws . . . unless the unearned increment is expressly made income, it is not considered income in any sense of the word, but simply increase of value or capital.” [Congressional Report, April 26, 1913.] When pressed still further, he added: “My judgment would be that as to the occasional purchase of real estate not by a dealer or one making the buying and selling a business, this bill would only apply to profits on sales where the land was purchased and sold during the same year.” [Such a provision, it will be remembered, was contained in the law of 1864.]
As this section was adopted in the light of Mr. Hull’s explanation, it is not unlikely that it will be so interpreted as to carry out the evident intention of its framers. If so, the same rule will apply also to profits from the sales of securities or other personal property. This would seem to be a fairly satisfactory solution of an undoubted difficulty.
One of the congressman ingenuously asked, in reply to a proposition to reduce the exemption [i.e., $3,000/4,000]; “Does the gentleman not think it would defeat every member who would vote for this amendment if the fact were known at home?” [Congressional Record, p. 1215, May 6, 1913] And another member said:
I venture the assertion that if Congress at the first opportunity which it has had of levying a direct tax upon the people without apportionment, should levy a tax which would fall upon every citizen of the land, that tax would not stay upon the statute book longer than the first election which followed the first call of the tax collector. [Ibid., p. 1218]
In justice, however, to the majority, we must quote the statement made by Mr. Murray, of Oklahoma:
There are those who would say that we should begin at $1000, in lieu of $4000. They forget the principle upon which this tax is founded, and that is that every man who is making no more than a living should not be taxed upon living earnings, but should be taxed upon the surplus that he makes over and above that amount necessary for good living. We also recognize the assumption that $4000 will reach the highest grade of good living. . . . The purpose of this tax is nothing more than to levy a tribute upon that surplus wealth which requires extra expense, and in doing so, it is nothing more than meting out evenhanded justice. [Congressional Record, p.1219]”
“The Federal Income Tax”, Edwin Robert Anderson Seligman, LL.D., “Political Science Quarterly”, Vol. XXIX, Number I, March, 1914, pp. 1, 7-8, 12