Congress: Trading stock on inside information?

16th amendment passed because people wanted Congress to tax rent, interest and property income the same way as their work wages were taxed.

State governments would never need money and interference from Federal Government if they were to build there own highway, maintain their own airwaves, launched their own Moon mission, agree not to prosecute minorities, have their governor not stands in way of kids attending schools, etc etc. Over period of 200 years, both technology and working of States has led to more power getting concentrated in hand of Federal government, because people wished so.

Perhaps the framers thought states would act more sensibly, but that is not what seems to have happened. This also leads to side effects like Federal government regulating what crops I can grow in my home, even if I have no intend of participating in any commerce at all.

The taxation bit isn't on point at all. The Constitution gave Congress broad taxing authority: "That the authority conferred upon Congress by § 8 of Article I 'to lay and collect taxes, duties, imposts and excises' is exhaustive and embraces every conceivable power of taxation has never been questioned" Bruschaber v. Union Pacific, 240 U.S. 1, 12 (1916).

The limits the Constitution imposed were in "the requirements of Art. I, § 8, cl. 1, that 'all duties, imposts and excises shall be uniform throughout the United States,' and... the limitations of Art. I, § 2, cl. 3, that 'direct taxes shall be apportioned among the several States' and of Art. I, § 9, cl. 4, that 'no capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration hereinbefore directed to be taken.'"

I.e. direct taxes must be apportioned, while excise (indirect) taxes must be uniform throughout the states.

Now, "direct" is a term of art. It does not mean that Congress can't directly tax individuals. The Framers intended for "direct taxes" to be a narrowly-defined category.

"What are direct taxes within the meaning of the Constitution? The Constitution declares that a capitation tax is a direct tax, and both in theory and practice a tax on land is deemed to be a direct tax." Hylton v. U.S., 3 US 171, 176 (1796).

"I never entertained a doubt that the principal, I will not say, the only, objects that the framers of the Constitution contemplated as falling within the rule of apportionment were a capitation tax and a tax on land." Id. at 177.

Now an 1895 case called Pollock v. Farmers' Loan & Trust Co. ruled that a tax on income from property was effectively a direct tax. It noted that a tax on the gross value of land was one of the two taxes considered direct by the Framers (the other being a capitation--head tax), and determined that a tax on income from land was basically the same thing.

What the 16th amendment did, then, was not grant Congress a broad new taxing authority had did not previously have, but nor even resolve the question of whether an income tax was a direct tax or an indirect tax, but simply removed the constraint of apportionment from the income tax, whether or not it was a direct tax.

Many people think Pollock was wrongly decided, for the simple reason that the income tax is much more like an excise tax than a property tax. The distinction between the two, as the Framers understood it was that a direct tax could not be shifted to another person, but had to be paid by the person it was legally allocated to. A head tax is the ultimate direct tax: you have to pay it, regardless of anything else.

The prototypical indirect tax is something like a sales (excise) tax, where the cost of the tax can be passed along to the buyer. The income tax is much more like an excise tax than a direct tax. It only taxes the proceeds from market transactions involving goods and labor. Income taxes are readily shifted to someone besides who it is legally incident to. Payroll taxes, for example, are apportioned by the market among employer and employee irrespective of how they are apportioned legally. Essentially, the income tax for most people functions like an excise tax on labor.

What changed between 1789 and today was not really that the 16th Amendment gave Congress carte blanche to tax the heck out of people, but rather that nearly all of the country's activity became subject to market transactions that brought it within Congress's taxing power. If you lived on a farm like in 1789, being nearly self-sufficient, like most of America at the time, the IRS could collect very little from you even today. It can't tax the value resulting from growing your own food or making your own clothes. It's only because you participate in market transactions for every little thing, from selling your labor on the open market to buying your bread on the open market, that brings so much activity within Congress's taxing power.

The result was an institution in the Senate the was regressive by nearly any measure by the 1890's and 1900's.