Eisner v. Macomber is a key case in income tax law.

Its rather narrow but important application is

often misapplied or misunderstood by tax protesters. Anti-tax activists often use this case to argue
that wages from labor cannot be taxed as income. The decision in Eisner v. Macomber, however,
was not about wages, and the exception for stock dividends was narrow.
This is a typical accurate, but misleading quote from the case:
" In order, therefore, that the clauses cited from Article I of the Constitution may have proper
force and effect save only as modified by the Amendment, and that the latter also may have
proper effect, it is essential to distinguish between what is and what is not 'income' as the
term is there used; and to apply the distinction as cases arise according to truth and
substance without regard to form. Congress by any definition it may adopt cannot conclude
the matter, since it cannot by legislation alter the Constitution, from which it derives its power
to legislate, and within whose limitations alone that power can be lawfully exercised"
[emphasis added]
The Supreme Court did discuss what constituted income in Eisner v. Macomber, and quoted
from Towne v. Eisner:
"Just as we deem the legislative intent manifest to tax the stockholder with respect to such
accumulations only if and when, and to the extent that, his interest in them comes to fruition
as income, that is, in dividends declared, so we can perceive no constitutional obstacle that
stands in the way of carrying out this intent when dividends are declared out of a pre-existing
surplus. ... Congress was at liberty under the amendment to tax as income, without
apportionment, everything that became income, in the ordinary sense of the word, after the
adoption of the amendment, including dividends received in the ordinary course by a
stockholder from a corporation, even though they were extraordinary in amount and might
appear upon analysis to be a mere realization in possession of an inchoate and contingent
interest that the stockholder had in a surplus of corporate assets previously existing."
[emphasis added]
An important principle taken from Eisner v. Macomber is that the word "income" in the
Sixteenth Amendment is generally given its ordinary plain English meaning, and wealth and
property that is not income may not be taxed as income by the Federal Government. The
Court was clear, however, that taxes on property and wealth could be levied freely by the
states, and could be levied by the Federal Government if each state were required to pay a
proportion of the tax relative to its population.