Congress enacted the Wilson Tariff Act on August 28, 1894. Sections 27 through 37 of that statute levied an annual tax of two percent on the gains, profits, and income received in the preceding calendar year by every citizen of the United States and every person residing therein when such income exceeded four thousand dollars and was derived from any kind of property, rents, interest, dividends, salaries, professions, trades, employments, vocations, or any other source whatever.
The tax was to be assessed, levied, collected, and paid beginning January 1, 1895, and to continue until January 1, 1900. The cases before the Court were styled Pollock v. Farmers' Loan and Trust Company and Hyde v. Continental Trust Company.
The cases reached the Supreme Court after adverse rulings in the lower courts. They were first argued in March 1895 and reargued on May 6, 7, and 8, 1895, after the Court had issued an earlier decision addressing only the tax on income from real estate and municipal bonds.
On rehearing the Court considered the validity of the tax as applied to a person's entire income from all sources. The 1890 census reported the true valuation of real and personal property in the United States at $65,037,091,197, of which real estate with improvements accounted for $39,544,544,333. The act exempted the income of mutual insurance companies, building associations, mutual savings banks, and ecclesiastical organizations.
The Supreme Court vacated its earlier decrees and, on May 20, 1895, reversed the judgments below with instructions to grant the relief prayed for by the stockholders.
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