Copyright (c) 1998 Tax Analysts
Tax Notes
AUGUST 3, 1998
LENGTH: 21195 words
DEPARTMENT: Special Reports (SPR)
CITE: 80 Tax Notes 591
HEADLINE: 80 Tax Notes 591 - THE CONSTITUTIONAL MEANING OF 'APPORTIONMENT OF DIRECT TAXES'. (Tax Policy) (Doc 98-24225 (20 pages))
AUTHOR: Johnson, Calvin H.
Tax Analysts
CODE: Tax Policy
INDEX: Constitution, limits to taxation; Constitution, taxing power
TEXT: THE CONSTITUTIONAL MEANING OF 'APPORTIONMENT OF DIRECT TAXES'
03 AUG 98
Professor Calvin H. Johnson argues current descriptions of the constitutional requirement that direct taxes be apportioned among the states badly distort the original meaning.
In a Tax Notes special report, Calvin H. Johnson, professor of law at the University of Texas, argues that current descriptions of the constitutional requirement that direct taxes be apportioned among the states badly distort the original meaning. Johnson argues that the requirement should be read as originally intended so that Congress can tax consumption or wealth without constitutional impediment.
Calvin H. Johnson is Andrews & Kurth Centennial Professor of Law, University of Texas.
Johnson argues that current descriptions of the constitutional requirement that direct taxes be apportioned among the states badly distort the original meaning. Currrent discriptions treat apportioment as if it were intended to protect individuals and hobble the government. Apportionment was not intended and does not work as an individual right, he argues. Rather, apportionment is a vestige of the requisition system brought over into the Constitution solely to help settle a dispute as to the power of the slave states in Congress. As a matter of lexicography, 'direct tax' usually referred to all taxes except for customs duties, but the Founders in the early Supreme Court, Johnson argues, were unwilling to require apportionment when it was unreasonable and defined 'direct tax' strategically to avoid the inequity of apportionment. Johnson argues that we should return to that doctrine so that Congress can tax consumption or wealth, without constitutional impediment.
This report is based heavily on Calvin Johnson, 'Apportionment of Direct Tax: The Foul-up in the Core of the Constitution,' 7 William & Mary Bill of Rights J. -- (forthcoming November 1998), which has a fuller discussion of many of the issues. The author wants to thank the participants responding to his presentation of this issue before the Teaching Tax Committee of the American Bar Association Tax Section, the University of Texas Government Department, and the University of Texas Law School. He wants to thank especially David Braybrooke, Erik Jensen, Doug Laycock, Jack Rakove, and Ted Schneyer for many helpful comments to prior drafts.
The report uses abbreviations for sources cited repeatedly in the footnotes, and the abbreviations are explained in an appendix.
1 The Constitution requires that direct taxes imposed by Congress be apportioned among the states by population. /1/ Apportionment means, for example, that if a state has twice the population of another, twice the amount of direct tax must be collected from within the more populous state. This report explains the historical purpose of the apportionment requirement and the original, very broad meaning of 'direct tax' in the constitutional debates of 1787-1788. It concludes that 'direct tax' needs to be defined strategically to avoid unreasonable apportionment, as the Founders did when the Constitution was young.
2 Current descriptions of the apportionment requirement badly distort the original meaning. Current wisdom treats apportionment as a right of private property against the government, intended to hobble Congress's use of direct tax. Charles Beard, for instance, has argued that apportionment was adopted 'so that numbers cannot transfer the tax burden onto accumulated wealth.' /2/ Owen Fiss has argued that apportionment was intended to mean that Congress can not pass a direct tax 'without committing great inequity and injustice -- so that practically, Congress cannot tax the subject at all, except possibly in time of war. . . .' /3/
3 The primary sources of the constitutional debates of 1787- 1788 give a very different picture of the historical understanding. Apportionment was not adopted to protect any individual nor to hobble the federal government. Apportionment is a vestige of the requisition system under the Articles of Confederation. The formula for apportionment was adopted to reach wealth within the states and not to protect wealth. Apportionment is also a vestige of disputes between slave and nonslave states as to power in Congress. Apportionment of taxes was brought over into the Constitution solely to help settle contentions among the states as to what votes the slave states would have in the House of Representatives.
4 The Founders also intended direct taxes to be used without hobble or inequity. Within the constitutional debates, giving Congress the power to lay 'direct tax' was understood as an important expansion of federal power and not as a restriction upon the government. Within that purpose, 'direct taxes' was understood very broadly, usually defined as a synonym for 'internal tax,' encompassing all taxes like taxes the states were using and excluding only customs duties on imports.
5 Apportionment was, however, thought out among states and it does not work well on the individual level. Apportionment can necessarily force inequitably high tax rates to be imposed on individuals, for reasons that have nothing to do with the individual's situation. The Founders did not see the injustice of apportionment as they debated the Constitution and, when they did see it, they were willing to fix their error by reinterpretation of terms. In the 1796 Hylton v. United States /4/ decision, the Supreme Court held that a carriage tax, which had been defined as a 'direct tax' in the constitutional debates, did not have to be apportioned because 'apportionment is only to be adopted in such cases where it can reasonably apply.' /5/ The rule that no tax is 'direct' if apportionment of it is unreasonable was sound judicial doctrine for the first hundred years of the Republic and it is Hylton to which we need to return. Under Hylton, Congress would have the power to choose a consumption tax or wealth tax, without hobble or inequity, as the Founders intended.
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I. Origin of the
Apportionment Requirement
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A. Requisitions
6 Apportionment of direct taxes among the states was brought over into the Constitution from the requisition system under the Articles of Confederation. Under the Articles, Congress could raise revenue only by a requisition upon the states. Each state was required to pay its quota of the requisition by raising and collecting taxes under its own laws and using its own agents. /6/ Requisitions arose in 1776 as the source of revenue to fight the Revolutionary War when there was no federal government with officials who could organize or collect a federal-level tax. /7/
7 Requisitions arose by necessity from the thinness of the federal government. In 1698, William Penn had proposed a plan, never effected, for an annual meeting of delegates from the colonies to discuss issues of common defense. Penn's plan would have let his congress of delegates set quotas for contributions of men and money by each of the colonies for their common safety. /8/ In 1776, as well as in Penn's time, the term 'congress' still meant primarily an assemblage of diplomats and not a government /9/ and apportionment of the common burden was as necessary to the 1776 congress as it would have been to a 1698 congress. Apportionment of taxes among the states by some formula or other was necessarily required by the requisition system itself.
8 Apportionment of taxes was also common within the states because the central administration was weak. Considerable delegation of discretion as to how to raise a quota apparently made the system more administrable. In 1778, for instance, New York created a state- wide tax that set rates at the state level of one shilling per pound on the value of improved lands and six pence per pound on the value of personal estate. Collection of the 1778 assessment was, however, 'very partial' and the Legislature replaced it in 1779 by assigning quotas to the different named counties within the state, so that assessors and tax collectors having knowledge of the local circumstances and abilities would raise the quota in different ways according to local conditions. /10/ Delaware apportioned its state tax between its two small counties. /11/
9 Population, within the formula for apportioning requisitions, was intended to be a proxy for the wealth of a state. The prior formula, under the original Articles of Confederation, required apportionment among the states according to the value of land and improvements within the state. The rule had proved to be inadministrable. Pennsylvania had offered appraisals that reduced her quota to about half of what other people thought it should be. The delegates to Congress wondered whether Doomsday or fair appraisals would come first. /12/ Population, however, was considered to be a fair measure of wealth. According to information the delegates gave at the Philadelphia convention, it did not make any material difference as to allocation of state taxes whether population or value of real estate was used. /13/ Madison argued to the Convention that as long as movement of people was unrestricted, population would always adjust to make population and wealth proportional. /14/ In the constitutional debates, population was universally considered as a proxy for the wealth of a state and considerably easier to ascertain. /15/
10 One of the primary purposes of the Constitution was to replace the requisition system by giving the new federal government the power to tax on its own without having to appeal to the states. Federal revenue collection under the Confederation had broken down almost entirely and had left the Continental Congress unable to pay its debts or fulfill its obligations. /16/ Requisitions were mandatory as a matter of theory, but in practice the states considered themselves to be sovereigns, and treated the requisitions as pleas from a beggar, often to be modified or ignored. The 1786 requisition, for instance, 'mandated' that states pay a total of $3,700,000, mostly to pay the Revolutionary War debts, but collected payments of only $663. /17/ The Confederation, deep in debt and paralyzed without revenue, could not pay its war debts, could not prevent Spain from excluding American shipping on the Mississippi River and could not force the British to abandon the frontier forts as required under the Treaty of Paris. /18/ The fiscal crisis caused the 'imbecility' or 'impotence' of the federal government under Confederation and that 'imbecility' or 'impotence' was the central impetus for the Constitution. /19/ To solve the failures of the Articles of Confederation, Madison explained to Jefferson, the Convention chose to adopt 'the alternative of a government, which instead of operating on the States, should operate without their intervention, on the individuals within them. . . .' /20/ Congress was given broad power to lay taxes directly on people, transactions or property without the 'continual recurrence to the state legislatures.' /21/
11 Many of the debaters in the constitutional debates nonetheless assumed that requisition might continue. The constitutional requirement of apportionment of direct taxes came into the Constitution before the Convention had given Congress the power to tax directly in lieu of requisitions. Many debaters thought Congress would continue to use requisitions, even after Congress was given its own taxing authority, with direct tax only as a back-up. /22/ Many thought that Congress would adopt a kind of quasi- requisition system under which it would first assign a quota to the state and then decide how to raise the quota within the state by various different means. /23/ The Convention gave Congress the power to avoid requisitions, but only many weeks after it had adopted apportionment of direct taxes among the states. /24/ Even after Congress was given the power to tax without requistions, apportionment of taxes was the status quo system still embedded in the thought process of the debaters. Apportionment of taxes among the states was an inherent part of the requisition system, it made sense only within the requisition system, and it was thought out only within the requisition system.
B. Slaves
12 The constitutional formula for apportionment by population of a state counted only three-fifths of the slaves. The language of the three-fifths formula comes from a 1783 proposal for requisitions. /25/ The three-fifths ratio was a compromise, after a number of rounds of fighting, between the slave and nonslave states as to how much a slave would contribute to the wealth of a state. /26/ The 1783 proposal was never officially adopted because the Articles of Confederation required unanimity for amendment and two states, New York and New Hampshire, refused to ratify the change. /27/ Population, with slaves counted at three-fifths, was called the federal ratio or federal formula in the constitutional debates, /28/ and the formula was considered a legitimate compromise of a hard- fought issue, in part because it had been ratified by 11 of the 13 states and should not have been blocked by such a small minority. /29/
13 Apportionment of taxes was brought into the Constitution only because the formula counted slaves at three-fifths. Apportionment of taxes was a small part of the debates used as a catalyst to help bridge the dispute over the power of the slave states in Congress. Determination of votes in Congress was the first order of business at the Philadelphia Convention. Disputes between large and small states and, even more, between slave and nonslave states were lengthy in a hot Philadelphia summer. /30/
14 Requiring taxes to be apportioned counting slaves at three- fifths was considered in the constitutional debates to be a benefit to the North, given so that they would acquiesce in greater power for the slave states in Congress. On June 11, 1787, the Philadelphia Convention had agreed, overwhelmingly, to determine votes in Congress by population, using the three-fifths 'federal ratio' to count the slaves in population. /31/ The Convention, however, was meeting for discussion only as a Committee of the Whole and that vote was not binding. The consensus thereafter broke up with an outbreak of sharp sectional partisanship over slavery and the North was unwilling to repeat its endorsement. /32/ Governeur Morris of New Jersey authored the amendment to apportion taxes, as well as votes, by the same three-fifths federal formula. He had objected, the day before his proposed amendment, that including slaves in determining votes in the House would give the South an incentive to increase the number of their slaves. /33/ Morris's amendment, including slaves at three- fifths in determination of taxes as well, would moderate the incentive. Apportionment of taxes also allowed the Northern delegates to tell their constituents that they had allowed slaves to be included in determining votes only because slaves were included in taxes as well. /34/ The effect of the Morris motion to apportion taxes was to change Northern votes. /35/
15 Apportionment of direct taxes was a catalyst for settlement, but it was not itself an important bargaining chip. The North had already agreed that votes in Congress could be determined allowing the South to count slaves at three-fifths, in the nonbinding vote on June 11. While the North was unwilling to repeat its vote, that seems best explained by a flare up of emotions over slavery, which were always intense. Apportionment of direct taxes was brought into the Constitution as consideration to the North to return to its prior concessions to the South on votes in the House. Governeur Morris later tried to remove the apportionment requirement, explaining that he 'only meant it as a bridge to assist us over a certain gulph having passed the gulph, the bridge may be removed.' /36/ His tactical move, however, had by then hardened and apportionment of direct taxes counting slaves at three-fifths came into the Constitution.
16 Apportionment of taxes, with slaves counted at three- fifths, remained in the Constitution until the Civil War freed the slaves and mooted the original purpose. Apportionment of taxes by population, now counting all persons equally, remained part of the Constitution, however, even after the freeing of the slaves denuded the agreement of its historical justification. /37/
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II. Apportionable
Taxes
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17 Only 'direct taxes' need to be apportioned. When Governeur Morris first moved that taxes, as well as votes in the House, should be apportioned by the federal ratio, his motion would have required that all taxes be governed by the formula. /38/ George Mason of Virginia responded that he liked the principle but was afraid that it might drive the Congress to requisitions. /39/ James Wilson of Pennsylvania also liked the principle, but could not see how it could be executed unless restrained to direct taxes. /40/ Governeur Morris responded by amending his own motion, so as to prevent hobbling the new Congress as to taxes, so that only direct taxes would be apportioned by the federal ratio. /41/
A. Direct and Internal Tax as Synonyms
18 Within the constitutional debates, the term, 'direct tax' seems to have had a very broad meaning, usually including all taxes except for customs duties. Customs duties were called the 'impost' in the Constitution debates. The impost was assigned exclusively to the federal government, but 'direct taxes' were taxes like the state taxes in which the federal and the existing state government had overlapping jurisdiction.
19 Giving Congress the power to lay direct taxes was the most controversial issue of the ratification debates. /42/ The Anti- Federalists offered an amendment to the Philadelphia draft of the Constitution in all of the ratification conventions except the earliest ones, which would have denied Congress the power to lay direct taxes, except within a state that was in default of paying its quota of a requisition. Under the Anti-Federalist amendment, the state, not the federal, government would ordinarily choose the object of tax and state officers would ordinarily be the ones to collect tax. The amendment denying Congress 'direct tax' was endorsed by 7 of the 13 states, /43/ and it was explicitly defeated only in two early conventions. /44/ Plausibly, in another posture the amendment would have been endorsed by 11 states, more than the nine states needed for amendment. /45/ The Federalists, however, successfully persuaded the state conventions to express their objections to the Constitution as proposed amendments instead of conditions to acceptance. /46/ Madison promised to offer all the Anti-Federalist amendments that were 'not objectionable, or unsafe' /47/ in the new Congress and he indeed did offer the first 10 amendments to the Constitution, called now the Bill of Rights. /48/ Madison's Bill of Rights, however, did not include the Anti- Federalist denial of Congress's power to lay direct tax and when the amendment was offered separately, it was defeated, 39 votes to 9, on the floor of the House. /49/
20 Within the debate the important distinction was between 'external' taxes, meaning the 'impost' or duties on imports, and 'internal' taxes, meaning direct taxes. The Anti-Federalists generally conceded the impost to the federal government. /50/ In 1781 and 1783, under the Articles of Confederation, Congress had passed a 5 percent federal impost. Eleven of the 13 states had approved the impost in each case, but the Articles of Confederation required unanimity, so that even a tax perceived overwhelmingly as necessary could not be passed. /51/ Under some estimates, the 5 percent impost would have been sufficient to pay the federal government's peacetime expenses. /52/ The defeat of the imposts, by a small minority of states, generated the financial crises that motivated the Constitution.
21 The impost was also conceded to the federal government for administrative reasons. Customs duties by the individual states would be difficult to enforce, Hamilton argued, because the bays, rivers, and long borders between the states made smuggling too easy. On the federal level, by contrast, the impost could be collected easily just by guarding one side -- the Atlantic. /53/
22 The distinction between internal and external taxes also carried over into the constitutional debates from Revolutionary War rhetoric. Benjamin Franklin and others had argued in the 1760s that the Crown might be allowed the power to lay external taxes or customs duties, even without representation for the Colonies, but not internal taxes (such as a stamp tax). /54/ In the constitutional debate, 'impost' was considered a legitimate federal tax because it could be collected without interfering with the internal police of the states. /55/
23 While largely conceding the impost to the federal government, the Anti-Federalists argued vigorously against Congress having 'direct' or 'internal' taxes. Congress might use a power to lay direct taxes to inconceivable excess, they argued, 'swallowing up every object of taxation and consequently plundering the several states of every means of support .' /56/ 'The power of DIRECT TAXATION,' they said, 'will further apply to every individual as congress may tax land, cattle, trades, occupations &c to any amount, and every object of INTERNAL TAX is of that nature, that however oppressive, the people will have but this alternative, either to pay the tax, or let their property be taken, for all resistance will be in vain. /57/ ' Direct taxes take hold of every species of property,' the Anti-Federalists argued, 'and come home to every man's house and packet. . . . Direct taxes are so oppressive as to grind the face of the poor, and render the lives of the common people a burden to them.' /58/ To enforce direct taxes, they argued, the Congress would send the militia of some other state 'to cut your throats, destroy your plantations, drive away cattle and horses, abuse your wives, kill your infants, ravish your daughters and live in free quarters until you get in good humour and pay all that they think proper to ask of you.' /59/ To render the Congress 'safe and proper,' Anti-Federalist James Monroe argued, 'I would take from it one power only -- I mean that of direct taxation.' /60/
24 The Federalists, on their side of the debate, argued that direct or internal taxes would be necessary, especially in time of war. The single most important speech of ratification is probably James Wilson's speech in the State House Yard just after the Philadelphia convention broke up. /61/ Wilson argued that, while the impost would probably be sufficient for federal needs, Congress needed the power of 'direct tax' within reach in case of emergency. /62/ War was also said to be increasingly a matter settled by the purse and not the sword. A government that could command only a fraction of its resources for revenue was 'like a man with but one arm to defend him self.' /63/ 'Take direct taxation from the list of Federal authorities,' Madison argued, and Virginia will be open to 'surprize and devestation whenever an enemy powerful at Sea chuses to invade her.' /64/
25 Even in peacetime, Hamilton argued, giving Congress the import duties, but not internal or direct taxes, would leave to the Union only one third of the resources of the community, but the responsibility to pay for 90-95 percent of its expenses. /65/ 'Money,' Hamilton argued, is 'the vital principle of the body politic; is that which sustains its life and motion, and enables it to perform its most essential functions. A complete power, therefore, to procure a regular and adequate supply of tax revenue , as far as the resources the community will permit, may be regarded as an indispensable ingredient in every constitution.' /66/
26 Madison also
argued to the Virginia Ratification Convention that they should not deny to
Congress power to lay direct taxes because otherwise the federal government
would raise taxes in peacetime only by the impost, which would hurt the South
disproportionately:
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The Southern States, from having
fewer manufacturers will
import and consume more. They
will pay more of the imposts. The more
commerce is burdened,
the more the disproportion will be
against them. If direct
taxation be mixed with other taxes, it
will be in the power
of the General Government to lessen that
inequality. /67/
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This power of imposing direct taxes,' argued Edmund Randolph, 'has been proved to be essential to the very existence of the Union.' /68/ Why, in any event, the Federalists asked, would any man 'choose a lame horse, lest a sound one run away with him?' /69/
27 Thomas Jefferson was a wavering Federalist on the issue: He wrote from his Ambassadorship in Paris, for instance, asking 'Would it not have been better to assign to Congress exclusively the article of imposts for federal purposes, & to have left DIRECT TAXATION exclusively to the states?' /70/ Four days later, he switched back, saying 'many of the opposition wish to take from Congress the power of INTERNAL TAXATION,' but that ' c alculation has convinced me that this would be very mischievous.' /71/ Wavering or not on the issue, Jefferson was using 'direct taxes' in 1787-1788 as a synonym for 'internal tax' and as the opposite of the 'impost.' Within the debate, both Federalists /72/ and Anti-Federalists /73/ used 'internal tax' as a synonym for 'direct tax' and used 'indirect tax' as synonymous with the 'impost.' /74/
28 In any event, the Federalists won the issue and the new government ended up, as the Anti-Federalists objected, 'vested with every species of internal tax.' /75/ Once the Constitution was ratified, moreover, Madison promptly urged the use of direct taxes, including a tax on real estate, lest the states preempt the area. /76/
B. In Lieu of Requisitions
29 'Direct taxes' were also thought of broadly because they were the taxes that would replace requisitions. The Constitution legalized the shift from apportionment of requisitions by value of land and improvements to apportionment of taxes by population under the federal ratio -- the 1783 proposal to shift to population having been defeated by the Articles' unanimity requirement. As the Constitution was being ratified, the South celebrated the shift from allocation by value of land over to allocation by population as very much in their favor. A Virginia federalist argued that Virginia would get a tax cut because Virginia now paid more tax than Massachusetts, 'whose number of white inhabitants is nearly double.' /77/ The North Carolina delegates to the Philadelphia Convention wrote home in jubilation that the population formula 'must be greatly in our favor for most of their farms are small and many of them live in towns.' /78/ The South, a French observer said, 'would pay more if the contributions were proportional to the extent and to the fertility of the land.' /79/ That shift in formula could have an effect in the real burden of tax, as these observers assume, only under the assumption that apportionable 'direct taxes' were thought to constitute substantially all of the federal tax burden previously paid via requisitions.
30 'Direct taxes' were thought of in the constitutional debates as those taxes that were like state taxes. The Anti- Federalists opposed giving Congress the power to lay direct taxes because it might lead to conflict if, for instance, both state and federal tax collectors tried to seize or replevin the same horse. /80/ The Federalists argued that concurrent jurisdiction of state and federal governments over tax was a good rule, the only way to prevent complete subordination of the federal government to state power or complete subordination of the individual states to the federal government. /81/ On both sides, the arguments assume that federal direct taxes are those taxes like the taxes imposed by the states. In 1796, Congress asked the Treasury Department to see if direct taxes could be raised by apportioning taxes among the states. Treasury in response inventoried the tax systems of the states and labeled its inventory of the state tax system as an inventory of 'Direct Taxes.' /82/ All of the debaters would have been aware of a model of what was meant by direct tax, at least in some vague way, by their familiarity with some state tax. State taxes were the model of what was thought of as direct tax. /83/
31 Equating 'direct taxes' with state taxes means that the scope of 'direct taxes' is very wide. The states, as shown by Treasury's inventory of 'direct taxes,' taxed a wide scope of items. The core of the tax system in every state were taxes on land and improved real estate, but the states taxed income and trades and uses of goods and personal items. /84/ Virginia, to cite one example, taxed five pounds in currency held by any one person. /85/
32 In the Federalist, Alexander Hamilton argued for a narrower definition of 'direct tax' than would have been generally accepted by other speakers. He argued that 'direct taxes' referred only to a head tax and to a tax on land. /86/ Hamilton's definition was picked up by the courts. /87/ On this issue, however, Hamilton was plausibly acting, as one Anti-Federalist put it, 'consistent with his aim and desire of increasing the power of the federal government as far as possible.' /88/ By the middle of 1788, Hamilton had become 'out of humour' with apportionment among the states in any shape. /89/ No apportionment formula, he argued, could ever fairly capture the resources of the new nation. /90/ Land taxes and head taxes would have been considered direct taxes by all speakers at the time of the Constitution -- land taxes were the core of all of the state tax systems and land value was the basis of the extant formula for allocating requisitions. State taxes, however, extended considerably beyond land taxes to tax almost everything in sight and all those taxes would usually have been considered direct. Hamilton's use of 'direct tax' to include only land and head taxes was strategic to avoid a result and it would not have been accepted by most speakers in the original constitutional debates. /91/
C. Exemption for Excises?
33 Under doctrine developed by the Supreme Court at the end of the 19th century, 'excise taxes' are not 'direct taxes' and do not need to be apportioned. In Pollock v. Farmer's Loan & Trust Co, /92/ the Supreme Court held that an unapportioned income tax was not constitutional. In the period after Pollock, however, the Court seems to have had second thoughts about its 'mistaken theory' in Pollock /93/ and so found that major taxes were constitutional, without apportionment, on the theory that they were 'excise taxes' and not 'direct taxes.' The 'excise tax' exception eventually expanded to bless all taxes that Pollock had not killed, including a tax on commodity trading, /94/ the federal estate tax, /95/ the corporate income tax, /96/ and the gift tax. /97/ 'Excise tax' in the period after Pollock came to refer to taxes on uses of property and not mere ownership. /98/
34 The broad exemption is not well based in the historical record. 'Direct tax' was used in the constitutional debates both to include 'excises' and to exclude 'excises.' 'Excise' was, in any event, a very narrow term. The broad exemption for excise taxes, accordingly, seems like a tactical move without a sound base in the original intent.
35 The Founders usually used the term 'direct tax' to include 'excise taxes.' In the debates over whether Congress could have the power to lay direct taxes, most speakers used 'direct' as synonymous with the term 'internal taxes,' meaning everything but the impost, and that usage would make 'direct taxes' cover 'excises.' /99/ In the Virginia Convention, Madison and the Virginia Federalists argued that apportionment would prevent Congress from enacting high-rate taxes on slaves that would force the freeing of the slaves. /100/ Apportionment would protect the slaveholders, as Madison argued that it would, only if apportionment also covered excise taxes on slaves. Madison even said that a tax on domestic liquor -- the paradigm of an excise tax -- was a 'direct' tax.' /101/ John Taylor of North Carolina argued in 1795 that apportionment 'was the most important stipulation of the whole compact,' and that evasion of the restriction by a subterfuge of a 'direct excise' would leave Congress 'free to levy any tax without restraint.' /102/ The Anti-Federalists also hated excise taxes about as much as they hated direct taxes, /103/ so that if Anti-Federalist rhetoric defines the current scope of federal power, then there is no room for an exemption from apportionment for excises.
36 'Direct tax,' however, also was used in the constitutional debates to exclude 'excise taxes.' The version of the Anti-Federalist amendment on direct taxes that was offered in Virginia, North Carolina, and New York prohibited Congress from laying not only direct taxes, but also 'excises,' /104/ implying that the authors thought excises needed to be mentioned separately, at least to cover a possible misinterpretation. Late in the Philadelphia Convention, Governeur Morris argued that 'the Legislature will have indefinite power to tax . . . by excises, and duties on imports without apportionment ' /105/ and Morris has a special status because he had been the author of the motion requiring apportionment in the first place. /106/ In the Federalist, Hamilton argued that Congress can get sufficient knowledge 'as to indirect taxes, including stamp taxes and excises on articles of consumption,' thereby defining stamp taxes and excises as not direct taxes. /107/ There are other examples among the Northern Federalists in which 'direct tax' was used to exclude 'excises.' /108/ More of the usages of 'direct tax' seem to include 'excise taxes' than exclude them, but there are a number of examples in which there is an exemption from apportionment for excise taxes.
37 An exclusion from the term 'direct tax' for excises can also be deduced from the constitutional requirement that tax rates must be uniform among the states. Article I, section 2 of the Constitution requires that tax rates for customs duties, stamp taxes, and excise taxes must be uniform across the states. As explained in the next section, if taxed items are not equal per capita in different states, a requirement that taxes be apportioned by population is not consistent with a requirement that rates be uniform across the states. From this it can be deduced that taxes that must be uniform, including excises, cannot be apportioned.
38 The difficulty with the argument is that the Founders did not know that apportionment was inconsistent with uniform rates. Madison was the most important actor upon the Constitution and a proponent of apportionment, but he did not know that uniform rates were inconsistent with apportionment. Immediately after ratification, Madison told Hamilton privately that the federal government should have a stamp tax, but that he did not know if they could be apportioned in time. /109/ The stamp tax was the 'duty' that had to be uniform in rate across the states under Article I, Section 2. /110/ Madison did not see that by force of necessary logic the stamp tax could not have a uniform rate across the states and also be apportioned, unless by happenstance documents subject to stamp tax were spread evenly across the population.
39 The availability of an exemption for excises, however, would not have mattered much to the Founders because the term 'excise tax' was so narrow at the time. At the time of the constitutional debates, 'excise' meant a tax on whiskey and other such spirituous liquors and not much else. Jefferson said in 1789 that the term 'excise' meant, at least in Massachusetts, a tax on liquor, but nothing else. /111/ The New York, /112/ New Hampshire, /113/ and Pennsylvania /114/ taxes that were called 'excises' were entirely taxes on liquor. Congress proposed a number of different taxes in 1782 and 1783, including a poll tax, a tax on slaves, the impost on imported goods, and a tax on houses measured by windows, but only the tax on 'Spirituous liquors' was called an 'excise.' /115/ Hamilton wrote to President Washington in 1792 to extol use of the 'Excise Law' because, according to Hamilton, 'There is perhaps no article of more general and equal consumption than whiskey .' /116/
40 The term 'excise' also seems to have been used a bit beyond the whiskey tax during the ratification period to include other taxes designed to discourage luxury and encourage morals. During the ratification period, Connecticut, Massachusetts (1781- 1794), New Hampshire (1787-1791), and Rhode Island (1783-1789) had taxes 'for the suppression of Immorality, Luxury and Extravagance,' which they called 'excises,' which covered taxes on gambling items, billiard tables and a number of luxury items in addition to liquor. /117/ A tax on snuff, debated at length in 1792 in the new Congress, was called an 'excise' midway through the debates and thereafter called an 'excise' by both opponents and proponents of the tax. /118/ The New York ratifying convention recommended an amendment, a variation of the standard Anti-Federalist limitations on direct tax, that would have denied Congress the right to impose excise taxes, except for excise taxes on liquor, which implies that there existed an 'excise' that was not a liquor tax. /119/ The Connecticut tax called an 'excise' covered liquor, but it also extended to other luxury pleasures, such as beaver or felt hats, coffee, and, of course, chocolate.
41 A broad definition of 'excise' is hemmed in, however, by what John Jay called 'specific direct taxes,' /120/ that is, fixed- rate taxes on specific goods. The Treasury's 1794 inventory of 'direct taxes' included many instances of state taxes on selected goods at fixed rates, which were called 'direct taxes' and not called 'excises.' /121/ James Madison argued that a tax on 'manufacturers' was a direct tax /122/ and that taxes on tobacco, slaves, and carriages would be direct. /123/ A leading Anti-Federalist New Yorker, Melancton Smith, used a tax on horses to illustrate 'direct tax.' /124
42 As a matter of lexicography, every widely accepted usage of a term becomes a definition /125/ and both the definition of 'direct tax' with 'excise' excluded and the definition of 'direct tax' with 'excise' included, were accepted usages in the debates. Lexicography of the terms in the debates, unfortunately, does not settle whether 'excise taxes' must be apportioned. Even if 'excises' are excluded from 'direct tax,' however, the exemption does not mean much because 'excise' was defined so narrowly. Thus under original intent, federal nonincome taxes, including tax on inheritances, consumption, wealth, carriages for hire or personal use, hunting licenses, or tires would be unconstitutional unless they are apportioned among the states by population.
________________________________________________________________________________
III. Perversity of
Apportionment
________________________________________________________________________________
A. Perversity Explained
43 Apportionment of direct taxes was considered a reasonable rule as it was adopted, but for reasons that the Founders did not see or understand, apportionment proves to be a killing requirement when the taxed items are not spread evenly per capita among the states. The Constitution gave Congress the power to choose the tax base, but if Congress chooses an item or tax base that is not equal per capita across states, then the results of apportionment are perverse.
44 Assume, for instance, that Congress taxes carriages, as many of the states had, and that carriages are distributed unevenly. Carriage taxes are 'direct taxes' under nonstrategic usage of the time. /126/ Assume that New York and Virginia have the same population under the federal ratio, so that they must bear the same tax. Assume also that New York has 10 times as many carriages as Virginia has, because carriages tend to be urban vehicles. To satisfy apportionment, tax rates on Virginia carriages must then be 10 times the tax rates on New York carriages. The results are necessary and independent of policy. Virginia tax rates must be 10 times higher because she has fewer carriages over which to spread her quota.
45 Apportionment can also force terrible injustice upon an individual taxpayer. Assume, for instance, that there are no carriages in Kentucky. Kentucky's entire quota, determined by its population, would then hang suspended at the border waiting to fall on the first poor soul innocent enough to bring a carriage into Kentucky. The penalty is independent of policy. The rule was just thought out on the state level and it necessarily causes the abuse at the individual level.
46 Assume, to take a more current example, that Congress enacts a general tax on consumption. Assume quite reasonably that a general consumption tax is a direct tax, which must be apportioned. The Sixteenth Amendment allows an income tax without apportionment, but the proponents of a consumption tax seek to 'pull the income tax out by its roots and throw it away.' /127/ Under ordinary usage a consumption tax is different from an income tax and so does not fairly qualify under the income tax Amendment. /128/ Assume, finally, that Connecticut per capita consumption is twice Mississippi per capita consumption. /129/ To satisfy apportionment, the tax rates on Mississippi consumption must then be twice as high as the tax rates on Connecticut consumption. The results are necessary and independent of policy. /130/ Mississippi is a poorer state and has less consumption over which to spread her quota.
47 A 'flat tax' on consumption would not be constitutional because the uniform tax rate across the states is inconsistent with apportionment by population when per capita consumption varies among the states. A consumption tax that is apportioned would be constitutional, but tax rates that are twice as high in Mississippi as in Connecticut would not bring laud to the proponents of the tax, at least not in Mississippi. Proponents of the Flat Tax, thus, can have a consumption tax or they can have strict construction of the Constitution, but they cannot have both.
48 The Founders thus created a dilemma for themselves. They intended to give Congress the power to lay direct taxes. Giving Congress that power was intended to solve the fiscal crisis that had caused the 'impotence' and 'imbecility' at the federal level. The drafters then attached a condition to that power to lay direct taxes, apportionment, which made direct taxes perverse. No one in the debates understood apportionment to be a hobble or a perversity and yet it is in the constitutional text.
B. Hylton v. United States
49 In 1795 when the Founders, sitting as Justices, saw that apportionment functioned unreasonably, they interpreted the Constitution by cy pres, /131/ defining 'direct tax' strategically so as to avoid the nonsense. In Hylton v. United States, /132/ the Court held that a federal tax on carriages was constitutional, although not apportioned. A tax on carriages had been defined as a direct tax by the first Chief Justice (John Jay) in the ratification debates /133/ and by Madison later /134/ and carriage taxes in different states were listed on the Treasury's first inventory of 'Direct Taxes.' /135/ Within the debates, a carriage tax was not an impost and it was one of the state taxes that had been used to satisfy requisitions, so it fit comfortably with the intellectual meaning of direct tax. Notwithstanding the literal meaning of direct tax, the Court, speaking unanimously, held that the tax was not direct, so as to avoid the apportionment requirement.
50 Alexander Hamilton, just recently retired as Secretary of the Treasury, argued for the federal government in Hylton that the federal tax on carriages was not a direct tax because 'no construction ought to prevail calculated to defeat the express and necessary authority of the government.' /136/ 'It would be contrary to reason and to every rule of sound construction,' he said, 'to adopt a principle for regulating the exercise of a clear constitutional power which would defeat the exercise of the power.' /137/ Considering the tax on carriages as a direct tax,' he said, 'would defeat the power of laying such a duty.' 'This is a consequence,' he concluded, 'which ought not to ensue from construction.' /138/
51 The Court
agreed unanimously. Mr. Justice Samuel Chase of Maryland said,
________________________________________________________________________________
The Constitution evidently
contemplated no taxes as direct
taxes but only such as Congress could lay
in proportion to the
census. The rule of apportionment is only
to be adopted in such
cases where it can reasonably apply, and
the subject taxed must
ever determine the application of the
rule. /139/
________________________________________________________________________________
Mr. Justice James Iradell of North Carolina agreed, saying 'As all direct taxes must apportioned, it is evident that the Constitution contemplated none as direct but such as could be apportioned.' /140/ Mr. Justice William Paterson of New Jersey, also agreed, saying that apportionment was 'absurd, and inequitable,' and that 'a tax on carriages, if apportioned would be oppressive and pernicious' /141/
52 The pragmatic construction in Hylton is especially legitimate because the justices deciding the case were all key Founders as to the tax debates: Mr. Justice James Wilson (second only to Madison in influence in Philadelphia) /142/ had been a key debater as both in the creation of the apportionment formula /143/ and the scope of federal taxes. /144/ William Paterson had been the chief representative articulating the concerns of the small states in the Convention's disputes over allocation of votes in Congress. /145/ Samuel Chase had represented the South in the 1776 debates arguing to exclude slaves from the tax formulas. /146/ James Iradell had not been at the Philadelphia convention, but his speeches on behalf of the Federalists occupy about 40 percent of the North Carolina ratification debates. /147/ Oliver Ellsworth of Connecticut, the Chief Justice, joined the Court too late to hear the oral arguments and did not participate in the case, but he supped with the others /148/ and would have let his opinions be known. Ellsworth was an important influence on tax both in Philadelphia and in the Connecticut ratification convention. /149/ These were the Founders in Hylton and they knew.
53 The Hylton
strategic definition of 'direct tax' to avoid apportionment was sound doctrine
for 100 years. In Pacific Insurance Company v. Soule, /150/ the Supreme Court
held that a tax on the capital and income of an insurance company was
constitutional, although not apportioned, by construing the tax as not
'direct':
________________________________________________________________________________
The consequences which would follow the apportionment of
the tax . . ., in the manner prescribed
by the Constitution,
must not be overlooked. They are very
obvious. Where insurance
corporations are numerous and rich, it
might be light; where
none exist, it could not be collected;
where they are few and
poor, it would fall upon them with such
weight as to involve
annihilation. It cannot be supposed that
the Framers of the
Constitution intended that any tax should
be apportioned, the
collection of which on that principle
would be attended with
such results. The consequences are fatal
to the proposition.
/151/
________________________________________________________________________________
In 1875, in Scholey v. Rew, /152/ on the same logic, the
Court held that a tax on succession by death was not direct because
________________________________________________________________________________
i f all taxes that political
economists regard as direct
taxes should be held to fall within those
words in the
Constitution, Congress would be derived
of the practical power
to impose such taxes and the taxing power
would be crippled; FOR
NO CONGRESS WOULD DARE TO APPORTION, FOR
INSTANCE, THE INCOME
TAX. /153/
________________________________________________________________________________
Finally, in Springer v. United States, /154 in 1881, the
Court held that Civil War income tax on individuals was not direct on the logic
and authority of Hylton:
________________________________________________________________________________
It was well held in Hylton that
where such evils would
attend the apportionment of a tax, the
Constitution could not
have intended that apportionment should
be made. This view
applies with even greater force to the
income tax in question
in this case. Where the population is
large and the incomes are
few and small, it would be intolerably
oppressive. /155/
________________________________________________________________________________
C. The Glory of Hylton
54 Even beyond the specific applications of the doctrine, Hylton was a laudable, responsible decision that generalizes to apply to all taxes. The grand purpose of the Constitution was to give Congress the power to lay direct taxes without perversity or hobble. The federal government needed a reliable source of revenue, without the begging from the states that was required by requisitions. Congress would need direct taxes, especially during war time, when an enemy strong at sea cut off the revenue from the impost. Without direct taxes, Madison said, Virginia will be open to 'surprize and devastation whenever an enemy powerful at Sea chuses to invade her.' /156/ Congress was also to be given power to lay direct taxes in time of peace so as to end the imbecility of the federal government under the Confederation and to avoid exclusive reliance on the impost, which had differing effect in different sections. /157/
55 The Constitution also requires that tax rates be uniform across the states, at least, for stamp taxes, custom duties and excise taxes. /158/ 'Uniform rates' plausibly expresses a fundamental right of individuals: Virginians should not pay higher taxes on carriages, for instance, just because they are Virginians. The rate of tax under apportionment would be determined by happenstance by what jurisdiction the individual is assigned to. But uniformity of rates applicable to individuals is logically inconsistent with apportionment by the federal ratio. Apportionment was a rule thought out on the state level to determine power among states and it turns out counter-intuitively to force inequity of treatment on the individual level.
56 The Founders themselves did not see apportionment as inconsistent with uniformity of tax rates. Apportionment was considered in the debates as a requirement, parallel to the uniform tax rate requirement, that would prevent Congress from favoring citizens of one state at the expense of citizens of another. /159/ Madison, a key founder, did not see that uniform rates and apportionment were inconsistent. /160/ Hamilton opposed apportionment on policy grounds because no formula could ever fairly capture the resources of the nation /161/ and had he seen that apportionment was not only bad policy but also inconsistent with uniform rates, he certainly would have given the Convention the argument. The Founders assumed that direct taxes would be used and they had no explanation for the uneven tax rates, because they did not see the issue. Once it is assumed that direct taxes are to be used at any time, a rule that requires uneven tax rates in different states has no justification.
57 The constitutional text can be read, consistent with Hylton, to require apportionment only when apportionment is reasonable. Uniformity of tax rates is a more fundamental principle of equity restraining the government because it applies for the benefit of individuals. It is possible to have uniform tax rates and apportionment only when the tax base is the same per capita across the states. The only tax base that will reliably remain the same per capita is a head tax or 'capitation' itself. If Congress were to adopt a head tax or capitation, uniformity and apportionment would be consistent and it would be reasonable to require uniform rates. Outside of the capitation, however, apportionment should recede in favor of the stronger, more fundamental right of uniform rates. The Constitution, article I, section 9, provides that 'no capitation or other direct taxes shall be laid . . . without apportionment. /162/ One might read section 9 by the maxim of ejusdem generis /163/ as saying that the series ending in 'other direct' refers to taxes that like a capitation can be reasonably apportioned among the states by population without absurdity or inequity.
58 'Direct tax' was debated in the ratification process as an empowerment of Congress, not a restriction on congressional power. The Anti-Federalists hated direct tax, but apportionment did not come from the Anti-Federalists, they did not adopt apportionment as their own, and they did not understand it as a protection against direct tax. They opposed direct tax, even if apportioned. /164/ While the Anti-Federalists would have denied Congress the power to lay any direct tax, moreover, they lost on the issue and had no affect on the text. By perseverance and manipulation of the posture, the Federalists won on the issue to allow Congress to lay direct tax. Allowing apportionment as a hobble on direct tax would reverse the direction of the historical Federalist victory.
59 For some taxes, Congress can reasonably avoid the perversity of apportionment by avoiding the tax. If a good is spread unevenly among the states, like lobster, oil, tobacco or cotton -- or slaves -- it might be wise and fair tax policy for Congress to avoid the tax. A federal tax on unevently distributed goods would fall unevenly across different sections of the country and might reasonably be avoided for that reason. Uneven taxes might also be great taxes -- it might be wise to tax oil to achieve conservation or to tax slaveholding to achieve manumission. Whatever the policy, the Constitution did give Congress the power to choose the tax base without veto by the states. The essential issue in the Federalists defeating the Anti-Federalist amendment that would have forced Congress to use requisitions before using direct taxes was whether Congress or state legislatures would choose the tax base. Under the resolution of the issue, giving Congress the power over direct taxes, Congress may tax items that it chooses to tax.
60 The perversity of apportionment, more fundamentally, is not avoidable when the federal tax base goes beyond taxation of specific items to rest on a wider economic tax base. Connecticut has about twice the per capita income of Mississippi. One would expect that the Connecticut per capita tax base would be more or less twice that of Mississippi, whether one uses wealth, income, sales, value added, consumption or any other measure of economic well being and ability to contribute tax. Given the disparity, an apportioned tax will necessarily have tax rates that are twice as high in the poorer state for the reason that the poorer state has less of a tax base over which to spread her quota. That result is simply perverse and cannot be understood to prohibit Congress's trying to reach the wealth or economic well being of the country, however measured. The original purpose of the apportionment formula was to reach the wealth of a state. Once it is given that Congress will use a tax that reaches economic well being and once the tax base is uneven, apportionment becomes a rule too silly to be enforced.
61 The historical reasons that explain why apportionment was adopted, moreover, have all disappeared. Apportionment was a product of the requisition system and thought out only within requisitions, which necessarily apportioned taxes among the states. When it was finally settled by design and evolution that the Constitution had ended requisitions, apportionment became a vestige from a lost world that no longer made sense. Apportionment was also brought over into the Constitution from the Articles of Confederation only to settle a dispute as to the power of the slave states in the House of Representatives. With the end of slavery, the North no longer needed consideration to allow slave state power in Congress and the historical justification for the rule disappeared.
D. Pollock?
62 In 1895 in Pollock v. Farmer's Loan & Trust /165/ the Supreme Court implicitly overruled Hylton v. United States and the line of cases that followed it, without saying so, to hold that an income tax was a direct tax that was unconstitutional without apportionment. For reasons just expressed, Hylton is consistent with the basic constitutional intent and so Pollock is not. Pollock has, with justice, been called 'the Dred Scott decision of government revenue.' /166/ Current law, however, is best understood as governed by Hylton and not by Pollock.
63 The Court in Pollock said that the apportionment requirement was 'one of the bulwarks of private rights and private property.' /167/ That statement is historical error on several levels. Apportionment arose in a compromise among states over the Congressional power of the slave states. It is not part of the Bill of Rights and cannot be construed as a right of individual against the government. Apportioned taxes have never been associated with just taxes as a matter of history. The taxes that Robin Hood fought against, for example, were taxes that King John collected by apportioning a quota to the Sheriff of Nottingham to collect as he saw fit. /168/ Apportionment among the states, moreover, will force a higher, inequitable tax rate upon individuals (e.g., a 10 times rate on carriages in Virginia) resting on nothing to do with the individual's situation and depending only on the tax base within the state that the individual by happenstance resides in. A requirement, apportionment, that could force a state's entire quota to fall on one individual can not be reconciled with individual rights.
64 Pollock should also be understood as reversed in full by the Sixteenth Amendment, allowing a tax on income without apportionment. /169/ The Sixteenth Amendment was understood by the public to be a recall of the Pollock decision that restored what had gone before. /170/ On its face, the Sixteenth Amendment allows only a tax on income to be laid without apportionment, and leaves other 'direct taxes' subject to apportionment. The Sixteenth Amendment was limited to income, however, because the income tax was the only unsettled controversy when the amendment was adopted. After Pollock and before the amendment, the Supreme Court seems to have had second thoughts about its 'mistaken theory' /171/ in Pollock, and the Court retreated to a more flexible, functional definition of 'direct tax' that allowed apportionment to be avoided. The Court created an exception to 'direct taxes' for 'excise taxes' and then let the 'excise tax' grow to describe taxes on commodity trading, /172/ on estates, /173/ and on corporate income, /174/ which bear very little resemblance to the whiskey tax at the core of the original definition of 'excise.' The Court let the 'excise tax' exception expand to bless all taxes that Pollock had not killed. With such an infinitely flexible 'excise tax' exemption, the legal situation at the time of the Sixteenth Amendment was much like that which had prevailed before Pollock, -- apportionment was not needed when the requirement was perverse -- except that only the income tax remained at issue. The Sixteenth Amendment governed only income taxes, not because it was trying to preserve some area of nonincome taxes in which apportionment was thought to be of continued constitutional value, but because apportionment seemed to have been otherwise sufficiently nullified by creative judicial doctrine. /175/ Amendments are sufficiently difficult to adopt that no one should increase the risks of failure by drafting an Amendment any broader than the minimum that is needed to accomplish its purpose. The point of the Sixteenth Amendment at the time was to destroy what seemed to be the last trace of apportionment and whatever remained of the Pollock doctrine -- much as scientists isolated and destroyed the last strongholds of the smallpox virus.
65 There is also good evidence that Pollock would be reversed in full by the modern Supreme Court if it ever became an issue. The key to the Pollock decision was that a tax on land was a direct tax and that a tax on rent from real estate was necessarily a tax on the real estate itself /176/ -- i.e., that the income tax was indirectly a direct tax. On its core logic, that a tax on income from a source will be considered to be a tax on the source, Pollock seems now invalid. Pollock had also held that a tax on municipal bond income was indirectly a prohibited tax on the municipality. In 1988, in South Carolina v. Baker, /177/ however, the Supreme Court overruled Pollock on municipal bonds and held that a nondiscriminatory tax on income received from a state was not indirectly a prohibited tax on the state. Under the logic of Baker, a general tax covering income from land would not be indirectly a direct tax on the land, leaving Pollock without its rationale. If Pollock is no longer valid constitutional law, then Hylton should stand fully resurrected. Under Hylton, if Congress adopts a head tax or a requisition, then apportionment by population would be reasonable and would be required. Apportionment will not be allowed, however, under Hylton to hobble tax of any kind where apportionment would be perverse.
66 Perhaps the worst aspect of Pollock is its perceived role as class doctrine selectively killing direct taxes on wealth, but not other direct taxes. Pollock said that the apportionment rule was designed 'to prevent an attack upon accumulated property by mere force of numbers.' /178/ Pollock is treated as the guardian of wealth, prohibiting taxes on capital, /179/ wealth, and even unrealized appreciation. /180/ Proponents of a consumption tax have presumed quite carelessly, on the other hand, that a consumption tax could not be affected by apportionment. /181/ Interpreting apportionment, under Pollock, as selectively of benefit for the wealthy turns the original meaning upside down. The Founders believed in taxes on wealth. The core of the state taxes used to satisfy requisitions were taxes on land and improvements, which was the most significant wealth of the times. The apportionment formula was designed to reach the wealth of the country by apportioning taxes by the relative wealth of the state.
67 The demise of Pollock, however, will resurrect Hylton, which better describes the Founders' more fundamental constitutional intent. Under Hylton, apportionment will never be interpreted as a hobble preventing taxes that Congress might choose. Under Hylton, Congress will have the power to lay a consumption tax, but Congress will also have the power to lay a tax on market appreciation and on wealth, /182/ as the Founders intended that it should.
________________________________________________________________________________
APPENDIX:
ABBREVIATIONS FOR SOURCES CITED IN FOOTNOTES
________________________________________________________________________________
68 The following
abbreviations are used in footnotes to refer to frequently cited sources. The
sources are listed by the alphabetical order of the abbreviation.
________________________________________________________________________________
Abbreviated
Reference Full Reference
CC. Documentary History of the
Ratification of the
Constitution: constitutional
Commentary, Public and
Private (John P. Kaminski and
Gaspare J. Saladino eds.
1981-1995). Volumes 13-18 of
overall set are volumes
1-6 of constitutional
Commentary.
1 CC 13 Id. (1981)
2 CC 14 Id. (1983)
3 CC 15 Id. (1984)
4 CC 16 Id. (1986)
5 CC 17 Id. (1995)
6 CC 18 Id. (1995)
CD 1 Documentary History of the
Constitution:
Constitutional Documents and
Records, 1776-1787
(Merrill Jensen, ed. 1981).
Delegate 4 Letters of Delegates to Congress,
1774-1777 (Paul H.
Smith et. al, ed., 1979)
Elliot Debates in the Conventions of the
Several States on
the Adoption of the Federal
Constitution, 5 volumes,
(Jonathan Elliot ed., 1907)
Farrand Records of the Federal Constitution of
1787 (Max
Farrand ed., rev. ed. 1937), 4
volumes.
Federalist The Federalist (Bantam Books 1982)
K&L The Founders' Constitution (Philip
Kurland & Ralph
Lerner, ed., 1987), 5 volumes
RSC 3 Documentary History of the
Ratification of the
Constitution: Ratifying State
Conventions: Delaware,
New Jersey, Georgia, Connecticut (Merrill Jensen, ed.
1976)
RSC-Pa. 2 Documentary History of the
Ratification of the
Constitution: Ratifying State
Conventions:
Pennsylvania (Merrill Jensen
ed, 1976)
RSC-Va. Documentary History of the
Ratification of the
Constitution: Ratifying State
Conventions: Virginia
(John P. Kaminski and Gaspare
J. Saladino, eds.).
Volumes 8-10 of overall set are
volumes 1-3 of
Virginia ratifying convention.
1 RSC-Va. 8 Id. (1988)
2 RSC-Va. 9 Id. (1990)
3 RSC-Va. 10 Id. (1993)
Strong The Complete Anti-Federalist (Herbert
Strong ed.
1981), 5 volumes.
Wolcott Oliver Wolcott (Secretary of the
Treasury), Direct
Taxes, Report to the House of
Representatives, H.R.
Doc. No. 100, 4th Cong., 2d
Sess. in 1 State Papers:
Finance 414.
________________________________________________________________________________
________________________________________________________________________________
FOOTNOTES
________________________________________________________________________________
/1/ U.S. Const., art. 1, section 2 (both direct taxes and representatives in U.S. House of Representative shall be apportioned among the states according to their numbers, counting all free persons as one, including persons bound to service for term of years, excluding Indians not taxed, and including three-fifths of slaves), section 8 (direct taxes shall be apportioned according to census required to be taken), amended by amend. XIII (abolishing slavery and mooting the counting of slaves at three-fifths) and amend. XVI (allowing income to be taxed without apportionment).
/2/ Charles A. Beard, An Economic Interpretation of the Constitution of the United States 176 (1913)
/3/ Owen Fiss, 'Troubled Beginnings of the Modern State, 1888- 1910,' 8 Oliver Wendell Holmes Devise History of the Supreme Court of the United States 93 (1993). Accord, Erik Jensen, 'The Apportionment of 'Direct Taxes': Are Consumption Taxes constitutional?' 97 Columb. L. Rev. 2334, 2356 (1997) (asking 'Why not read the apportionment requirement as an attempt to make impractical -- and thus effectively to limit, if not forbid -- direct taxes . . .?').
These interpretations seem to emanate from Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429 (1895) on rehearing 158 U.S. 601 (1895), discussed (without favor) in text, notes 164-177 infra.
/4/ 3 U.S. (Dallas) 171 (1796).
/5/ 3 U.S. (Dallas) at 174 (Chase, J.) (italics omitted).
/6/ Articles of Confederation, art. 8, in Appendix, Max Farrand, The Framing of the Constitution of the United States 216 (1913). The Articles of Confederation were not approved by all of the 13 original states until 1781, but they were drafted by a committee of Congress in 1776 and approved by Congress in 1778 and they served as the constitutional framework throughout the Revolutionary War. Id. at 2.
/7/ On the efforts that led the colonies to form a union to further the Revolution, see, e.g., Jack Rakove, The Beginnings of National Politics: An Interpretative History of the Continental Congress 205-215; Edmond Burnet, The Continental Congress 215-220 (1941); Merrill Jensen, Articles of Confederation, 108-124 (1970); E. James Ferguson, The Power of the Purse : a History of American Public Finance, 1776-1790. Prior to the requisitions proposed in 1776, Congress had financed the Revolutionary War solely by issuing paper money. Rakove, supra, at 205-215; Burnet, supra, at 215.
/8/ 1 Sources and Documents of the U.S. Constitution: National Documents 1492-1800, at 138 (William F. Swindler ed. 1980).
/9/ Rakove, Original Meanings: Politics and Ideas in the Making of the Constitution 206 (1996). See also Articles of Confederation, art. 8 referring to 'the united states in congress assembled.' (absence of capitalization in original).
/10/ Preamble, Law of the State of New York, 3d Sess., Ch. 27 (Oct. 1779) in First Laws of the State of New York 93. The supplanted 1778 statute is at id. 54.
/11/ An act for raising 10,500 pounds for the service of the year 1785, ch. 124b. (1785), in 2-part 1 First Laws of the State of Delaware (1987).
/12/ Report of the North Carolina Congressional Delegates to Governor Alexander Martin (March 24, 1783) in 20 Delegates at 90-91 (Paul H. Smith ed. 1993).
/13/ James Wilson (NJ.) (July 11, 1787), Debate in the Federal Convention, 1 Farrand at 587 (arguing that he had seen the figures from the Western settlements of Pennsylvania and compared them to Philadelphia and could see little difference between apportionment by wealth and apportionment by property in the impact on apportioned state tax); Nathaniel Gorham (Mass.), id. (arguing that said estimates of population and property value had been made for the towns in Massachusetts and that, even including Boston, 'the most exact proportion prevailed between the numbers & property.').
/14/ James Madison, Debate in the Federal Convention (July 11, 1787) in 1 Farrand 585.
/15/ Population was considered a proxy measure for wealth when the formula was proposed by Congress in 1783 (Report of the Committee on Revenue, 25 J. of the Continental Congress 922 (March 7, 1783) (shift to population justified solely as a shift to 'a more convenient and certain rule of ascertaining' quotas, without changing underlying principle that requisitions should be allocated by relative wealth of the states), James Madison, Debate in Continental Congress, 25 J. of the Continental Congress 949 (March 28, 1783) (endorsing the necessity of some simple and practicable rule); Nathaniel Gorham (Mass.), id. at 948 (March 27, 1783) (favoring the shift because of the clamors produced over valuations of land in Massachusetts), when the rule was debated in the Philadelphia Convention William Samuel Johnson (Conn.) (July 12, 1787), 1 Farrand at 593 (arguing that 'population was the best measure of wealth.'); James Madison, (July 11, 1787) id. at 585 (arguing that population was a sufficiently accurate measure of the relative wealth of the states, given that the states were roughly equal); Charles Pickney (So. Carolina) (July 12, 1787) id at 596 (arguing for a rule that included slaves, because they added equally with free labor to the state's wealth); Oliver Ellsworth (Conn.) (July 12, 1787) id. at 594.(proposing apportionment by population 'until some other rule that shall more accurately ascertain the wealth of the several states can be devised.'); James Wilson (Pa.) (July 9 & 11, 1787) id. at 176 & 587 (arguing that in districts as large as states, number of inhabitants was a fair measure of wealth.); George Mason (Va.) (July 11, 1787) id. at 579 (arguing that, while numbers were not always a precise standard of wealth, they were sufficiently so for every substantial purpose) and, finally, in the state ratification conventions both North and South. (James Wilson, Debate in the Pennsylvania Ratifying Convention (Dec. 4, 1787)) in 2 Elliot 483 (population is an exact measure of comparison among the provinces only when they have resources nearly equal, but of all objects which may be subjected to a determined and positive calculation, population approaches nearest to the truth) Federalist No. 34 at 12 (Hamilton) (describing apportionment by population as apportionment by 'reference to the proportion of wealth.') Thomas Davies, Debate in the Massachusetts Ratifying Convention, (Jan. 18, 1788) in 2 Elliot 4 (arguing that apportionment by population was the best that can be obtained for measuring comparative wealth); Charles Pickney, Debate in the South Carolina House of Representative on Calling the South Carolina Convention to ratify the Constitution (Jan. 17, 1788) in 4 CC 509 (arguing that 'the productive labor of its inhabitants was the best rule for ascertaining the wealth of a state').
/16/ The Revolutionary war was funded with printed money, borrowing in Europe, French subsidies, and requisitions from the states. By 1787 all of those sources had dried up. When the war ended, the states stopped paying their quotas, the French stopped giving or lending money, and the Congress had no reliable resources to lend any credibility to further debt. John P. Kaminski and Gaspare J. Saladino, Introduction, 1 CC 12-13; John P. Kaminski and Gaspare J. Saladino, Editorial Note, 2 RSC-Va 1174. Accord, Richard B. Morris, The Forging of the Union 1781-1789, 42 (1987) (obstinacy of Rhode Island in vetoing the impost left Federal government with no money, no funds and no disposition in the people to establish funds).
/17/ Roger H. Brown, Redeeming the Republic: Federalists, Taxation, and the Origins of the Constitution 26 (1993). See also Id. at 26 (Compliance with requisitions of 1784-1786 was only 23 percent).
/18/ The Federalist No. 15 at 68-69 (Alexander Hamilton) (citing continuing British occupation of frontier forts and Spanish exclusion from the Mississippi, plus national humiliation from failure to pay Revolutionary War debts as forcing the need for change of the weak Confederation).
/19/ Roger H. Brown, supra note 17 at 8, 155 (arguing that the breakdown in state's hard-money tax systems and consequent failure to meet requisitions was central impetus to Constitution). See also, e.g., The Federalist No. 22, at 105 (Alexander Hamilton) (arguing that requisition system was a system of 'imbecility' of the union); Publicola, 'Address to the Freemen of North Carolina,' North Carolina State Gazette (March 20, 1788) in 4 CC 436 (saying Continental Congress without the power to raise a single shilling has been reduced to the present state of imbecility); James Wilson, 'Speech at a Public Meeting in Philadelphia' (Oct. 6, 1787) in 1 CC 337, 343 (arguing it was the imbecility of the confederation that left the states with great debt); Alexander Hamilton as Secretary of the Treasury, 'Defense of Funding System,' (July 1795) in 19 Papers of Hamilton 22, 27 (Harold Syrett ed. 1973) (requisition from the states was a system of imbecility and impotence); Letter from Christopher Gore to Rufus King (Mass., June 28, 1787) quoted in Roger Brown, supra note 17, at 261 (saying our government is 'weak, languid, and inefficient to support the great objects of civil institutions' and that you must 'invent some plan to increase circulation'); James Madison, Speech in House of Representatives, April 8, 1789 (first working day under the new Constitution) in 12 Papers of James Madison 65 (Carlos Hobson & Robert Rutland, eds. 1979) (calling for retaliatory tariff on British shipping because 'the union, by the establishment of more effective government, has recovered from its state of imbecility that prevented a performance of its duties').
/20/ Letter of James Madison to Thomas Jefferson, October 24, 1787, 12 The Works of Thomas Jefferson 271 (Julian Boyd, ed. 1955)
/21/ Letter from Thomas Jefferson to James Madison (December 20, 1787) in 2 CC 402.
/22/ James McHenry, Debate in the Maryland House of Delegates (Nov. 29, 1787) in 3 Elliot 149 (arguing that Congress' power over direct taxes would not be exercised if the respective States would raise their quotas in any other manner more suitable to their own inclinations); Roger Sherman and Oliver Ellsworth to Governor Samuel Huntington, 'The Report of Connecticut's Delegates to the constitutional Convention' (Sept. 26, 1787) in 1 CC 470, 471 (arguing that the authority over direct tax need not be exercised if each state will furnish its quota); 'A Freeman' (Trench Coxe), 'To the Minority of the Convention of Pennsylvania III,' Pennsylvania Gazette, Feb. 6, 1788, in 4 CC 49, 51 (arguing that if states raised their quota first by the most easy and expeditious way, that would fulfill the quota and the federal government would 'with the least degree of policy, reason or virtue never attempt to interfere'). Cf. The Federalist No. 36 at 172 (Alexander Hamilton) (arguing that Congress' power to tax internally will have a strong influence in giving efficacy to requisitions because the States know that the Union can apply taxes without their agency should they not pay). But see 'Federal Farmer,' Letters to the Republican III (Oct. 10, 1787) in 2 CC 30, 37 (arguing that while he heard many gentlemen get rid of objections to direct tax by arguing that Congress will have power only to make requisitions, leaving it to the states to lay and collect them, but he saw 'little colour for this construction').
/23/ 'A Citizen of New Haven,' Connecticut Courant (Jan. 7, 1787) in RSC 524, 526 (saying that if Congress needs to go beyond the impost and sale of Western lands, then Congress shall apportion quotas and should any state neglect to furnish its quota, Congress may then raise the quota by tax in the same manner as the state ought to have done).
/24/ U.S. Const., art. 1, section 8 giving Congress the power to lay and collect taxes, duties, imposts and excises, was debated in the Convention on August 16, 1787 (1 Farrand 305) and agreed to on August 23 (Id. at 392). Apportionment of direct taxes among the states by the federal formula was debated and agreed to on July 12, 1787. Id. at 591-597.
/25/ 25 J. of the Continental Congress 922 (March 7, 1783). The text of the 1783 proposal provided that contributions to the Congressional treasury shall be supplied by the states 'in proportion to the whole number of white and other free citizens and inhabitants, of every age, sex and condition, including those bound to servitude for a term of years, and three-fifths of all other persons not comprehended in the foregoing description, except Indians, not paying taxes, in each State.' When the language was brought over into the Constitution, art. I, section 2, the reference to 'white and other free citizens' became simply a reference to 'free citizens' and the quoted language is otherwise the same.
/26/ Arguments over how slaves should be included in the tax apportionments start in 1776 (See, e.g., Samuel Chase (Maryland), Debate in the Continental Congress (July 30 , 1776); Thomas Jefferson's Notes of Proceedings in Congress, 4 Delegates 439 (arguing that slaves should be excluded from population in apportioning tax because that was double counting since slaves were like investment in cattle or horses); John Adams (Mass.) id. at 339- 440 (arguing that slaves should be included in apportioning taxes because they added wealth to the state just like free labour); James Wilson (Pa.) id. at 440 (arguing that slaves and freemen were both labourers who should be included in the count); Benjamin Harrison (Va.) id. at 440 (arguing for including slaves at half because that reflected the relative price of labor, north and south): James Wilson (Pa.), Debates in the Continental Congress, (March 28 1783), 25 J. of the Continental Congress 948-49 (1922) (saying that he was in Congress in 1776 and saw that the Articles of Confederation allocating requisitions according to value of land was agreed because it was impossible for the Eastern and slave states to agree on how slaves should be counted.). In 1783 in the proposal to move from appraisals of real estate to population, the South was willing to count slaves at one-half (Edward Clarke (NJ.), Debates in the Continental Congress (March 27, 1783), 25 J. of the Continental Congress 947: Report of the North Carolina Congressional Delegates to Governor Alexander Martin (March 24, 1783), 20 Delegates 90-91) The North proposed counting three-fourths (75 percent) of the slaves. A motion counting slaves at two-thirds (66 percent) lost on a five- state-to-five-state tie, with the South providing four of the five votes against, so to draw it. With some delay and on motion of Alexander Hamilton of New York, the Congress voted to count three- fifths of the slaves (60 percent) in the requisition formula. The three fifths compromise was then adopted unanimously, with 'despair on both sides of a more favorable rate of the slaves.' Debates and Proceedings in the Continental Congress, March 27-April 18, 1783, reprinted in Kaminski 21-23 (1995).
/27/ John P. Kaminski and Gaspare J. Saladino, Editorial Note, 2 RSC-Va. 1174
/28/ Kaminski at 21 (John P. Kaminski, ed. 1995) ('federal ratio'). See e.g., 'Federal Farmer,' Letter XVII (Jan. 23, 1788) in 5 CC 351, 358 ('federal plan'); 'A Citizen of New Haven' (Roger Sherman), Observations on the New Federal Constitution, Connecticut Courant (Jan. 7, 1788) in 3 CC 280, 282 ('federal rule'); Theodore Sedgewick (Federalist, Mass.), Selected Debates in Congress involving constitutional Principles, (May 6, 1794) in 4 Elliot 433 ('federal ratio')
/29/ See, e.g., James Wilson (Pa.), Debates at the Federal Convention (June 11, 1787), 1 Farrand 201; William Paterson (N.J.), Debates at the Federal Convention (July 9, 1787), 1 Farrand 561; Rufus King (Mass.) id. at 562 (federal ratio legitimate because 11 of 13 states had approved).
/30/ Rakove, supra note 9, 54, 60, 178 .
/31/ Id. (June 11, 1787) in 1 Farrand 201. The vote was 9 states to 2. Only Delaware and New Jersey opposed the motion and they did so, not because of any slave dispute, but because they were still holding out for the equal-vote-for-each-state rule, which was the rule under the Articles of Confederation and at the Convention itself.
/32/ Id.(July 11, 1787) at 586-588.
/33/ Id.(July 11, 1787) 588.
/34/ James Wilson (Pa.), Id. (July 12, 1787) at 597. James Wilson is being disingenuous because including slaves in determining votes came first and might well have been allowed on another day without apportionment of tax. Apportionment of tax, however, gave Wilson and the North an excuse to allow slaves to be counted for the House vote.
/35/ By comparison with the 4-6 no-vote on apportionment of votes only (counting slaves at ) on the day before, Pennsylvania and Maryland of the North passed over from no to yes and Massachusetts passed from no to divided. Including taxes in the formula changed the mind of the delegates of two northern states and reduced the opposition in Massachusetts. Including taxes also reduced the opposition in South Carolina -- South Carolina had been the only southern opposition on July 11 and it moved to a divided state on July 12. South Carolina was apparently holding out for including slaves in full in the vote on July 11 and some of its delegates decided on July 12 to compromise. Other than moderating the polar position in South Carolina, the impact of Morris' motion was in the North. Even with the tie to tax, the vote does not return to the 9-2 vote of June 11, where even the two opposition votes (Delaware and New Jersey) were looking for a continuation of the one-state-one-vote rule of the Confederation.
/36/ Id. (July 24, 1787) in 2 Farrand 206. The motion to remove the apportionment of direct taxes, however, was defeated.
/37/ Charles J. Bullock, 'The Origin, Purpose and Effect of the Direct-Tax Clause of the Federal Constitution, II,' 15 Pol. Sci. Qu. 452, 452 (1900) (saying that apportionment of direct taxes 'originated in the struggle to effect a compromise on the question of representation for the slaves and that 'it had no basis in any rational scheme for regulating taxation, and could have none'); Edwin R.A. Seligman, The Income Tax: A Study of the History, Theory and Practice of Income Taxation at Home and Abroad 555 (1914) (saying that 'it is clear that it was due simply and solely to the attempt to solve the difficulty connected with the maintenance of slavery.')
/38/ Id.(July 12, 1787) at 592.
/39/ Id.
/40/ Id. at 592-593.
/41/ See also Rufus King (Mass.) (May 30, 1787) in 1 Farrand 36 (persuading the Convention not to determine representation by contribution by the state because the federal legislature might collect taxes in a way that the sums drawn from each state could not be ascertained).
/42/ Letter from James Madison to Edmund Randolph (Dec. 2, 1787) in 2 CC at 332 (calling the direct tax 'the most popular topic among the adversaries' of the Constitution). See also 'Address of Seceding Assemblymen to the Pennsylvania General Assembly' (Philadelphia, Oct. 2, 1787) in 1 CC 295, 296-297 (saying that had the convention left the exercise of internal taxation to the separate states, there would be no objection to the plan of government).
/43/ In chronological order (1) Massachusetts (February 7, 1788), 1 Elliot 322; (2) South Carolina (May 23, 1788), 1 Elliot 322; (3) New Hampshire (June 21, 1788), 1 Elliot 326; (4) Virginia (June 27, 1788), 3 RSC-Va 1556; (5) New York (July 26, 1788), 1 Elliot 329; (6) North Carolina (August 1, 1788), 4 Elliot 245; and (7) Rhode Island (May 29, 1789), 1 Elliot 330. Four more states ratified too quickly for the Anti-Federalists to get organized enough to put their direct tax amendment into the debate: (1) Delaware (December 7, 1787) in RSC 110; (2) New Jersey (December 18, 1787), RSC 184; (3) Georgia (January 2, 1788), RSC 276; and (4) Connecticut (January 9, 1788), RSC 560- 562.
/44/ Pennsylvania (December 12, 1787) in RSC-Pa. 598, 624 and Maryland (April 28, 1788) in 2 Elliot 553.
/45/ U.S. Const., art. V (amendment requires two-thirds of states) (2/3 * 13 = 9, rounded upward), art. V I (nine of original 13 states needed for ratification of Constitution).
/46/ Rakove, supra note 9. at 106-108, 112, 113-115. Only North Carolina refused to go along with the gambit, rejecting the Constitution at its first convention. North Carolina ratified the Constitution only in a second vote in 1789. Rakove at 128-129.
/47/ 11 The Papers of James Madison at 177 (Charles F. Hobson & Robert A. Rutland eds., 1979) (statement of James Madison, Virginia Convention, June 24, 1788).
/48/ For a description of Madison's role, see e.g., Paul Finkelman, 'Intentionalism, the Founders and constitutional Interpretation,' 75 Tex. L. Rev. 435, 476-480 (1996) (review essay of Rakove, supra note 9) (Madison was somewhat reluctant father of the Bill of Rights); Robert Allen Rutland, The Birth of the Bill of Rights 1776-1791, at 190-218 (1955).
/49/ 1 Annals of Congress 431-42, 660-65, 773-77. See Ferguson, supra note 7, at 291 (1961).
/50/ Cato Uticenis, 'To the Freemen of Virginia,' Virginia Independent Chronicle (Oct. 17, 1787) in 1 RSC-Va 70, 73 (conceding impost and allowing requisitions if imposts are not sufficient); 'An Old Whig,' Letter VI,. Phila. Independent Gazetteer (Nov. 24, 1787) in 2 CC 215, 218; Brutus, 'Letter to the People of the State of New York V,' New York Journal (Dec. 13, 1787) in 2 CC 422, 426-27. There is, however, some Anti-Federalist opposition even to the impost. James Wadsworth, Speech to the Connecticut Convention (January 7, 1788) in 3 CC 547 (arguing that impost is not a proper mode of taxation); John Smilie, Debates in the Pennsylvania Ratifying Convention (Nov. 28, 1788) in RSC-Pa 407, 408-409 (saying that 'if they have unlimited power to drain the wealth of the people, WHETHER BY IMPOSTS OR BY DIRECT LEVIES, then the system is too formidable for states to break') (emphasis added). Smilie does, however, use 'impost' and 'direct taxes' as opposites covering all taxes.
/51/ John P. Kaminski & Gaspare J. Saladino, Editorial note, 1 CC at 17-18 (Rhode Island defeats 1781 impost), 37 (New York defeats 1783 impost), id., 4 CC 111 (New York and New Hampshire defeat 1783 impost); id., 2 RSC-Va 1174.
/52/ Letter of Edward Carrington to Thomas Jefferson, April 24, 1788, in 2 RSC-Va 754, 755 (imposts, requisitions plus sale of Western lands would probably be sufficient in peacetime).
/53/ The Federalist No. 12 at 58 (Hamilton).
/54/ Bernard Bailyn, 1 Pamphlets of the American Revolution 1750-1765, at 124-127 (describing arguments by Benjamin Franklin and others that Parliament should not impose internal taxes on the colonies).
/55/ Oliver Ellsworth, Debates in the Connecticut Convention on Ratification (Jan. 7. 1788) in RSC 547, 549, 550 (1978).
/56/ Robert Whitehill, Speech before Pennsylvania Ratifying Convention (Nov. 28, 1787) in RSC Pa 393, 397.
/57/ 'The Address and Reasons of Dissent of the Minority of the Convention of the State of Pennsylvania to their Constituents' (Dec. 18, 1787) in 3 CC 13, 30-31 (emphasis added).
/58/ Brutus, 'Letter to the People of the State of New York V,' New York Journal (December 13, 1787) in 1 CC 422, 427.
/59/ 'A Farmer and a Planter,' Maryland Journal (April 1, 1788) in 5 Strong at 74, 76. See also James Monroe, Debates in the Virginia Ratification Convention (June 10, 1788) in 2 RSC-Va 1110 (direct taxes give the U.S. absolute control over all the resources of the country); George Mason, Debates in the Virginia Ratification Convention (June 4, 1788) in 2 RSC-Va 936, 938 (power of direct tax is a dangerous power that will change the Confederation into one consolidated government); 'Dissent of the Minority of the Pennsylvania Convention,' (Dec. 18, 1787) in RSC-Pa 636 ('the standing army and select militia will enforce the collection of direct taxes ').
/60/ James Monroe, Debates in the Virginia Ratification Convention (June 10, 1788) in 2 RSC-Va 1109.
/61/ See discussion, John P. Kaminski and Gaspare J. Saladino, 1 CC at 344 & n. l; Rakove, supra note 9, at 136-137, 143-146.
/62/ James Wilson, Speech in the State House Yard, Philadelphia (Oct. 6, 1787) in RSC Pa 167, 171, 1 CC 342-343 (saying that although impost will probably be sufficient, Congress needs power of direct taxes within reach in cases of emergency and that there is no more reason to fear direct taxes than an impost).
/63/ Oliver Ellsworth, Speech to the Connecticut Convention (January 7, 1788) in 3 CC 274. See also The Federalist No. 36 at 175 (Alexander Hamilton) (acknowledging aversion 'to every project that is calculated to disarm the government of a single weapon which . . . might be usefully employed for general defence and security.'); id., No. 31 at 149 (arguing that since federal government had unlimited responsibilities in time of war or domestic unrest, it must be granted unlimited power to fund satisfaction of its responsibilities even in ordinary times); James Madison, Debates in the Virginia Ratification Convention (June 6, 1788) in 2 RSC-Va 995-96 (arguing that it was safe and just to vest federal government with direct tax, which is likely to be used only in war).
/64/ Letter of James Madison to George Thomas, January 29, 1789 in 2 The First Federal Election, 1788-1790 at 344 (Gordon DenBover, ed. 1984). See also Elisha Porter in Debates and Proceedings of the Convention of the Commonwealth of Massachusetts Held in the Year 1788 at 319 (1856) (saying that 'to grant only an impost is to invite our enemies to attack us, for shutting our ports is to destroy us.'); Thomas Jefferson, Letter to George Washington (Nov. 4, 1787) in 14 Works of Thomas Jefferson 328 (Julian Boyd, ed. 1958) (saying that ' c alculation has convinced me that circumstances may arise and probably will arise, wherein all the resources of taxation will be necessary for the safety of the state.').
/65/ The Federalist No. 34 at 163 (Alexander Hamilton). See also A 'Citizen of Philadelphia,' 'The Weaknesses of Brutus Exposed' (Nov. 8, 1787) in 2 CC 63, 67 (arguing that union can not be success without power of raising money); James Wilson, Speech in the State House Yard, Philadelphia (Oct. 6, 1787) in RSC Pa 167, 171 (arguing that delegation of the power of direct tax to the federal government was necessary given the broad federal duties to provide for national safety, dignity and discharge of debts); Thomas McKean, Speech before Pa. Ratification Convention (Dec. 10, 1787) in RSC Pa 544 (arguing that Congress power of direct tax was absolutely necessary for the salvation of the United States).
/66/ The Federalist No. 30 at 143 (Alexander Hamilton).
/67/ James Madison, Debates in the Virginia Ratification Convention, (June 11, 1788) in 2 RSC-Va. 1146.
/68/ Edmund Randolph, Speech before the Virginia Ratifying Convention (June 7, 1788), 3 Elliot 122.
/69/ 'A Citizen of Philadelphia, 'Remarks on the Address of Sixteen Members' (Oct. 18, 1787) in 1 CC 297, 301.
/70/ Letter by Thomas Jefferson to Edward Carrington (Dec. 21, 1787) in 1 RSC-Va 253 (emphasis added). Carrington responded that it was probable that imposts plus sale of western lands would cover federal needs in peacetime, but not in time of war. Letter by Edward Carrington to Thomas Jefferson (April 24, 1788) in 2 RSC-Va 754, 755.
/71/ Letter by Thomas Jefferson to William Carmichael (Dec. 25, 1787) in 14 Works of Thomas Jefferson 385 (Julian Boyd, ed. 1958). Jefferson made a final switch when he became President by successfully calling for the repeal of all internal taxes. Thomas Jefferson, First Message to Congress in 1 Basic Works of Jefferson at 337 (Philip Foner 1944) (calling for dispensing with internal taxes, comprehending excises, stamp, auction, license and carriage taxes). See generally Dumas Malone, Jefferson The President: First Term 1801- 1805, at 100-101 (1970).
/72/ 'A Citizen of New Haven' (Roger Sherman), 'Observations on the New Federal Constitution,' Connecticut Courant (Jan. 7, 1788) in 3 CC 280, 282 (arguing that most federal revenue could be raised by tariffs or sale of Western land, but if there should be occasion to resort to 'direct tax' then each state's quota would be ascertained by population).
/73/ 'An Old Whig,' 'Letter VI,' Philadelphia Independent Gazetteer (Nov. 24, 1787) in 2 CC 215, 218 (arguing that the true line between powers of Congress and several states is between internal and external taxes); 'Federal Farmer' (Anti- Federalist), 'Letter to the Republican (New York) XVII' (Jan. 23, 1788) in 5 CC 350, 358 (arguing that 'Congress ought not to raise moneys by internal tax,...except in strict conformity to the federal plan; that is, except where a state shall neglect for an unreasonable time to pay its quota.'); Address of Seceding Assemblymen to the Pennsylvania General Assembly (Philadelphia, Oct. 2, 1787) in 1 CC 295, 296-297 (saying that had the convention left the exercise of internal taxation to the separate states, there would be no objection to the plan of government).
/74/ 'Connecticutensis' (Federalist), 'To the people of the Connecticut,' American Mercury (Dec. 31, 1787) in RSC 512, 513. (arguing that ''indirect taxes,' meaning duties laid upon those foreign articles which are imported and sold among us,' are the easiest way to pay tax.); George Nicholas (Federalist), Debates in the Virginia Ratification Convention (June 6, 1788) in 2 RSC-Va 999- 1000 (arguing that money can be raised judiciously by imposts or indirect taxes).
/75/ Centinel I, Independent Gazetteer (Oct. 5, 1787) in RSC Pa 158, 162. See also E. James Ferguson, 'The Nationalist of 1781-1783 and the Economic Interpretation of the Constitution' 1, 12 in Gordon S. Wood, The Confederation and the Constitution: The Critical Issues (1979) (arguing that 'all the delicate questions of state interest were swept aside by the Constitution by a grant of unlimited power of taxation'). See also Veazie Bank v. Fenno, 75 U.S. (8 Wall.) 533, 540 (1870) (arguing that requisitions had reduced general government to impotency and that nothing is clearer than the purpose to give power of taxation of everything but exports, to its fullest extent) (holding that a tax on bank securities need not be apportioned).
/76/ In 1789 as soon as the Constitution was ratified, Hamilton, the new Secretary of the Treasury, asked for advice as to what taxes the new federal government should use. Madison in response called for a direct tax on land as 'an essential branch of national revenue' and advocated the tax 'before preoccupancy by the States becomes an impediment.' Letter from James Madison to Alexander Hamilton (Nov. 19, 1789) in 12 Papers of James Madison 449, 450 (Charles F. Hobson & Robert A. Rutland, eds. 1979). Madison's attitude in private suggests that his speech saying that the federal government would be unlikely to use direct tax, except in war, supra note 63, was mere rhetoric.
/77/ 'A Native of Virginia,' 'Observations upon the Proposed Plan of Federal Government,' (April 2, 1788) in 2 RSC-Va. 655, 663
/78/ Letter from William Blount, Richard D. Spaight, Hugh Williams to Gov. Caswell of North Carolina (Sept. 18, 1787) in 3 K&L 355.
/79/ Letter of Gaspard Joseph Amand Ducher of Wilmington, North Carolina French Consulate to Comte de la Luzerne of French Foreign Office (Feb. 2, 1788) in 4 CC 11, 12.
/80/ Melancton Smith (Anti-Federalist), Debate in the New York Ratifying Convention (June 27, 1788) in 2 Elliot 333.
/81/ The Federalist No. 34 at 163 (Alexander Hamilton).
/82/ Wolcott at 414.
/83/ See, e.g., John Marshall, Debates in the Virginia Ratification Convention (June 10, 1788) in 2 RSC-Va 1122 (arguing that direct taxes were 'well understood' to include taxes on land, slaves, stock and 'a few other articles of domestic property,') which reads like a description of the Virginia tax, with some details left out. See Wolcott at 431; An act for raising a supply of money for public exigencies (1783) in First Laws of the State of Virginia 58 (John Cushing, ed. 1982)).
/84/ See generally Wolcott at 414 et. seq. (inventorying state taxes in 1795). See also The Address and Reasons of Dissent of the Minority of the Convention of the State of Pennsylvania to their Constituents, quoted in text accompanying supra note 57, saying the direct tax power would allow Congress to tax 'land, cattle, trades, occupations &c.'
/85/ See Wolcott at 431; An act for raising a supply of money for public exigencies (1783) in First Laws of the State of Virginia 58 (John Cushing, ed. 1982).
/86/ The Federalist No. 21 at 102 (Alexander Hamilton). See also, Alexander Hamilton, Brief for the United States in Hylton v. United States in 7 Hamilton's Works 848 (arguing that only captivation or poll tax and tax on lands and buildings are presumed to be poll taxes); Theodore Sedgewich (Mass. Federalist) 4 Annals of Cong. 643-645 (May 6, 1794) (arguing that direct tax is limited to capitation and land tax).
/87/ See, e.g., Hylton v. United States, 3 U.S. (Dall.) 171, 176 (1796) (Paterson, J.) ( 'both in theory and practice, a tax on land is deemed to be a direct tax.') Congress in 1861 enacted a tax on real estate and a tax on income, but only the tax on land was called a direct tax and apportioned among the states. Act of August 5, 1861, ch. 45, sections 8, 49, 12 Stat. 292, 294-295, 309.
/88/ Luther Martin, 'Genuine Information IV,' Baltimore Maryland Gazette (January 15, 1788) in 3 CC 375, 378. Martin is not describing Hamilton particularly, but the description fits.
/89/ Letter from Alexander Hamilton to James Madison, July 8, 1788 in 1 Hamilton's Works 464 (John Hamilton, ed. 1851).
/90/ The Federalist No. 21, at 101.
/91/ Hamilton is a marginal figure at the Philadelphia convention, at least by comparison to his later importance. Hamilton is somewhat tarred as too nationalist, by association with Robert Morris, who had gone too far in suggesting that the Army might enforce its unpaid wages by more dramatic action upon Congress. Delegates voted by states and Hamilton was a minority within the New York delegation, which was appointed by Anti-Federalist Governor George Clinton. When the New York delegation quit the convention in July in protest that a radical new Constitution would be proposed, Hamilton was left behind, but only as a nonvoting observer. See, e.g., Rakove, supra note 9, at 28, 104, 254. Hamilton's fame comes from The Federalist and his later service as first Secretary of the Treasury.
/92/ 157 U.S. 429 on rehearing 158 U.S. 601 (1895).
/93/ Stanton v. Baltic Mining Co., 240 U.S. 103, 112 (1916).
/94/ Nicol v. Ames, 173 U.S. 509, 519 (1898).
/95/ Knowlton v. Moore, 178 U.S. 41, 78 (1900).
/96/ Flint v. Stone Tracey Co, 220 U.S. 107, 150 (1906) (corporate income tax prior to 16th Amendment).
/97/ Bromley v. McCaughn, 280 U.S. 124, 136 (1929).
/98/ See, e.g. Nicol v. Ames, 173 U.S. at 519. The first use of the argument was apparently in 1794 by Fisher Ames, a Massachusetts Federalist, arguing on the floor of the House that a tax on carriages would be constitutional. Debate in the U.S. House of Representatives, May, 1794, 3 Annals of Cong. 730 (arguing that the tax was an excise because 'the duty falls not on the mere possession but the use'). In context, Ames is making the argument strategically to avoid apportionment, however, and there is no argument within the constitutional debates of 1787 that would have used use or ownership as an important or viable distinction. The Wolcot inventory of direct taxes included a number of mere use taxes.
/99/ See supra notes 50-76, and accompanying text. See also Cato Uticenis, 'To the Freemen of Virginia,' Virginia Independent Chronicle (Oct. 17, 1787) in 1 RSC-Va 70, 73. (nobody but the Virginia legislature should have the power of direct taxation in this state if it should ever be found necessary to curse this land with hateful EXCISEMEN) (emphasis added); 'The Impartial Examiner I,' Virginia Independent Chronicle (March 25, 1788) in 1 RSC-Va 459, 462.('Consider the injuries to which this country may be subjected by excise law, -- by direct taxation of every kind.').
/100/ James Madison, Debates in the Virginia Ratification Convention (June 12, 1788) in 3 RSC-Va 1204 (taxes on tobacco or slaves are apportionable direct taxes); James Madison, Debates in the Virginia Ratification Convention (June 17, 1788) in 3 RSC-Va 1339 (tax on slaves are apportionable direct taxes); James Madison, Debate in U.S. House of Representatives (May 29, 1794) 4 Annals of Congress 729-730 reprinted in 3 K&L 357 (tax on carriages was unconstitutional because it was an unapportioned direct tax).
Madison plausibly was arguing that taxes on slaves were direct taxes because he believed that apportionment, but not uniformity, prevented Congress from raising taxes so high as to force manumission of the slaves. Debates in the Virginia Ratification Convention (June 17, 1788) in 3 RSC-Va 1304, 1338, 1342. See also George Nicholas, Debates in the Virginia Ratification Convention (June 17, 1788) in 3 RSC-Va 1342 (apportionment requirement prevents prohibitive tax on slaves, whereas uniform rate requirement does not); 'The State Soldier.' 'Letter IV,' Virginia Independent Chronicle (March 19, 1788) in 1 RSC-Va 509, 511 (tax on slaves apportionable); Abraham Baldwin (Georgia), 1 Annals of Cong. 1243 (Feb., 1790) (purpose of apportionment was to prevent 'any special tax on negro slaves'); Abraham Baldwin, Debates in the U.S. House of Representatives (Feb. 12, 1796) in 12 Documentary History of the First Federal Congress 309 (Helen Veit, ed. 1994) (direct tax clause prevents a tax on slaves)
George Mason replied to Madison in the Virginia ratification debates, I believe correctly, that apportionment gave no security to slaveholders because, while apportionment set the state's overall quota, the federal government could choose the object of tax and raise the entire quota by a tax on slaves, thereby annihilating that kind of property. George Mason, Debates in the Virginia Ratification Convention (June 17, 1788) in 3 RSC-Va 1342-43. Mason is correct under the adopted text of the Constitution. Congress was given the power to choose the object of tax and it could tax slaves alone within the state.
/101/ James Madison, Debates in the House of Representatives (Dec. 27, 1790) in 14 Documentary History of the First Federal Congress 190 (William C. DiGiacomantonio, et al., ed. 1995). Madison voted in favor of the internal excise tax on liquor, notwithstanding he considered it to be an unapportioned direct tax, by arguing that it was a kind of 'sumptuary regulation' (Id. at 195), which indicates that the Founders did not think that categorizing an unapportioned tax as 'direct' was necessarily fatal.
/102/ See also John Taylor, 'An Argument Respecting the constitutionality of the Carriage Tax' at 33 (May 1795) quoted in 4 Law and Practice of Alexander Hamilton 327 (Jules Goebel, Jr. and John H. Smith, eds., 1980)
/103/ Patrick Henry, Debates in the Virginia Ratification Convention (June 16, 1788) in 3 RSC-Va 1331 (saying ' e xcisemen may come in multitudes: -- For the limitation of their numbers no man knows'); Members Opposed to Ratification, Address to the People of Maryland (April 21, 1788) in 2 Elliot 547, 551 (calling excises 'the horror if a free people'); Amendments of the Minority of the Maryland Convention (April 29, 1788) in 5 CC 236, 246 (arguing that the people might also get rid of those odious taxes by excise and poll): James Findley, Debate in the U.S. House of Representatives, May 3, 1794, 3 Annals of Congress 624 (saying that 'ruin and depravity have always attended excise.') On the Federalist side, see The Federalist No. 12 at 57 (Hamilton) (arguing that 'excises must be confined within a narrow compass. The genius of the people will ill brook the inquisitive and preemptory spirit of excise laws.').
/104/ Virginia, 3 RSC-Va 1553-1554; North Carolina, 4 Elliot 245, 6 CC 317. As passed by the New York convention, the prohibitions on direct taxes and on excises were separate paragraphs. 1 Elliot 329.
/105/ Governeur Morris (NJ.), Debate in the Federal Convention (Aug. 8, 1787) in 2 Farrand 222.I See also id. (July 12, 1787) in 1 Farrand 591 (Morris moved to have apportionment apply to 'direct tax' but not to 'indirect taxes on...imports & on consumption.') (The reference to indirect taxes on consumption is plausibly a second reference to excise taxes as not direct, since import taxes are listed separately, but the reference is less clear than the Aug. 8 reference).
/106/ On the other hand, Morris was willing to apportion all taxes on July 12, not just direct taxes, id. at 592, and tried to get his whole handiwork repealed on July 24, 2 id. 206, so that it is clear that he was not especially attentive to the nuances of what would have to be apportioned.
/107/ The Federalist No. 36 at 171 (Alexander Hamilton) (arguing that Congress can get sufficient knowledge 'as to indirect taxes, including duties and excises on articles of consumption').
Hamilton, id., No. 12 at 57 (saying 'the greatest part of the national revenue is derived from taxes of the indirect kind, from imposts, and from excises.') is ambiguous as to whether Hamilton means to include excises as indirect taxes or to list 'excises' as in addition to 'indirect taxes.'
/108/ Robert Dawes, Debates in Massachusetts Ratifying Convention (Jan. 17-19, 1788) in 2 Elliot 36-45 reprinted in 2 K&L 122, 124 (arguing that 'it is easier for Congress to resort to impost or excises than to tax wholly by direct taxes'); Francis Dana, Debates in Massachusetts Ratifying Convention (Jan. 18, 1787) in 2 Elliot 42 (arguing that Congress would not levy direct taxes unless imposts and excises were insufficient); Robert Livingston, Debate in the New York Convention (June 27, 1787) in 2 Elliot 344 (arguing that Congress may need direct taxes because impost and excise will not be enough).
/109/ Letter from James Madison to Alexander Hamilton (Nov. 19, 1789) in 12 Papers of James Madison 449, 450 (Charles F. Hobson & Robert A. Rutland, eds. 1979). Madison in his letter also opposed the stamp tax because it was 'obnoxious to prejudice not yet worne out.'
/110/ 'Duty' was a code word for stamp tax. The drafters wanted to give Congress the power to impose a stamp tax without mentioning the name. Luther Martin, 'Genuine Information VI,' Baltimore Maryland Gazette (Jan. 15, 1788) in 3 CC 374, 376. The original Stamp Tax of 1765 that had precipitated the stamp tax crisis had purported not to lay a tax at all, but only a stamp 'duty.' Edward B. Whitney, 'The Income Tax and the Constitution,' 20 Harv. L. Rev. 280, 294 (1907).
/111/ 3 Oxford English Dictionary quoting Letter from Thomas Jefferson to Sarsfield, April 3, 1789 in 15 Works of Thomas Jefferson 25 (Julian Boyd, ed. 1958). Accord, Robert A. Becker, Revolution, Reform and Politics of American Tax, 1763-1783 at 11-12, 120 (1980) (references to excise are references to taxes on liquors). Jefferson believes that the Massachusetts definition is a perversion, saying that the true meaning outside Massachusetts is that 'excise' is a tax on retail or wholesale goods. Id. His letter also states, however, that in the Massachusetts ratification debates, the liquor tax was the only 'excise.'
/112/ First Laws of the State of New York at 54-55 (1779 excise tax on strong liquors), at 175 (1781 excise on strong liquors) (John Cushing, ed. 1984); Robert A. Becker, supra note 111, 1763-1783 at 65-66 (1980) (New York excise converted in 1768 from a quota system to 20 shilling fee to be paid by each licensed tavern).
/113/ First laws of the state of New Hampshire at 142 (John D. Cushing, ed. 1981) (repealing King's excise on several liquors).
/114/ Laws of the Commonwealth of Pennsylvania, in First Laws of the Commonwealth of Pennsylvania at 29 (1777 reference to collector of excise on spirituous liquors), 333-334 (excise on wine, rum, brandy and other spirits), 460 (excise on wine, rum, brandy and other spirits) (John Cushing, ed., 1984).
/115/ Report of Continental Congress, 11 March 1783, 25 J. of the Continental Congress 923 (Gov. print 1922); Report of a Grand Committee (September 4, 1782) 23 J. of the Continental Congress 545 (Gov. print 1911).
/116/ Letter from Alexander Hamilton to George Washington (Aug. 18, 1792).
/117/ Jules Goebel, Jr. and John H. Smith (eds.), supra note 101, at 302.
/118/ 3 Annals of Cong. 624-625 (May, 1792) (Representatives Findley and John Smilie, speaking against the tax, and Theodore Sedgewick speaking in favor).
/119/ 2 Elliot 329.
/120/ Debates in the New York Convention (July 1, 1787) in 2 Elliot 381 (assuming that 'tax of twenty shillings on all coaches' would be direct tax).
/121/ Id. at 419 (New Hampshire taxes at fixed state-wide rates, e.g., on land, horses, cattle, stock of merchants or tradesmen, money); 423 (Connecticut taxes at fixed state-wide rates on various objects, including plate, clocks and watches); 431 (Virginia taxes, e.g., on horses, billiard tables, and carriages).
/122/ See James Madison, quoted in text accompanying note 66 supra.
/123/ James Madison, Debates in the Virginia Ratification Convention (June 12, 1788) in 3 RSC-Va 1204 (taxes on tobacco or slaves are apportionable direct taxes); James Madison, Debates in the Virginia Ratification Convention (June 17, 1788) in 3 RSC-Va 1339 (tax on slaves are apportionable direct taxes); James Madison, Debate in U.S. House of Representatives (May 29, 1794) in 4 Annals of Congress 729-730 reprinted in 3 K&L 357 (tax on carriages was unconstitutional because it was an unapportioned direct tax). A prohibitive tax on slaves and tobacco would be the paradigm of taxes to encourage morals, so that not all taxes that would encourage morals are direct taxes, at least according to Madison.
/124/ Melancton Smith (Anti-Federalist), Debate in the New York Ratifying Convention (June 27, 1788) in 2 Elliot 333 (Congressional power to impose direct tax will mean that both state and federal government tax collectors will seek to seize or replevin the same horse). See also 'An Old Planter,' 'To the Planters and Farmers of Virginia,' Virginia Independent Chronicle (Feb. 20,. 1788) in 1 RSC- Va 394, 396 (tax on horses will be apportioned); Wolcott at 419, 420.
/125/ Samuel Johnson, Preface to the Dictionary (1755) as quoted in Harold Whitehall, 'The English Language in Webster's New World Dictionary' xxxiii (Collegiate ed. 1966) (saying that the 'sense of the word may easily be collected entire from the examples'). Accord, 'The English Language, in Merriam-Webster's Collegiate Dictionary 28a-29a (10th ed. 1993) (describing current procedures collecting citations to ascertain meaning and changes in word meaning).
/126/ See infra notes 133-135 and accompanying text.
/127/ Bill Archer (Republican of Texas), Chair of U.S. House Ways and Means Committee quoted in John Godfrey, 'Archer Keen on Killing Code, Full Speed Ahead on Tax Reform,' Tax Notes, Mar. 11, 1996, p. 1431.
/128/ Under best current usage, moreover, a ' consumption tax,' is different from an ' income tax' because a 'consumption tax' will exempt either savings or return from savings from tax, but an 'income tax' will tax both savings and the return from the savings. See, e.g., Department of Treasury, Blueprints for Basic Tax Reform 80 (1977) (defining 'income' as the sum of 'consumption' and increases in net worth). It is not all that easy to determine how far a tax can go in allowing exemption of savings or returns before it ceases to qualify under the 16th Amendment's safe haven, but there has to be some point at which a tax becomes a constitutionally poisoned consumption tax because of its consumption tax features. At the poles, the difference between an income tax and consumption tax are stark.
/129/ See, e.g. 1995 Information Please Almanac 62 (listing 1993 per capita income for Connecticut at $28,110 and for Mississippi at $14,894).
/130/ Let W equal wealth (or income or consumption or any other comprehensive tax base) with W1 and W2 representing wealth of State 1 and State 2 respectively. Let P equal population and let Q equal the total tax to be collected from the two states. The per capita wealth of rich state 1 is larger than the per capita wealth of poor state 2:
(1) W1 /P1 = k * W2 / P2,
with k greater than one. In the illustration in the text, k equals 2.
Apportionment by population means that
(2) Q1/P1 = Q2/P2.
where Q1 + Q2 = Q.
If we isolate P1 in equations (1) and (2) and set the results as equal to each other, we get the following (left side derived from (1), right side derived from (2)):
(3) (W1 *P2)/(k * W2) = P1 = (Q1 *P2) / Q2.
Rearranging (3) and canceling out P2 yields the conclusion that the tax rate (Q/W) in state 2 has to be k times higher than the tax rate in rich state 2:
(4) Q2/W2= k * Q1/W1.
With k = 2, the tax rates must be twice as high in the poorer state. The result is independent of whether the tax base is wealth or consumption.
/131/ 'Cy pres' literally means 'as near as possible' from the French for 'as near' or 'as close' IV Oxford Eng. Dict. 198 (2d. ed. 1989). See, e.g., First National Bank of Chicago, Trustee v. Elliot, 406 Ill. 44, 92 N.E. 2d 66, 73 (1950) (using cy pres to rechannel bequest to further the testator's general intent to help orphans, when the order of nuns named in the will said that the testators identified intent to build an orphanage was not practical with the funds made available); Democratic Central Committee of the Dist. of Columbia v. Washington Metro., 84 F.3d 451 (D.C. 1996) (using cy pres in class action to deliver settlement to current bus riders instead of prior-period bus riders who were actually hurt by the overcharge).
/132/ 3 U.S. (Dallas) 171 (1796). The most complete description of the politics and arguments surrounding the case is Julius Goebel, Jr. and Joseph H. Smith (eds.), Hylton v. United States, supra note 102, at 297 (1980).
/133/ John Jay, Debate in the New York Convention (July 1, 1787) in 2 Debates in the Conventions of the Several States on the Adoption of the Federal Constitution 381 (Jonathan Elliot, ed. 1907) (arguing that a tax of 20 shillings on all coaches would be a 'specific' direct tax). The editorial explanation of Hylton v. United States, supra note 102 at 300-302 (Jules Goebel, Jr. and John H. Smith, eds., 1980) has a catalogue of state taxes on carriages during the period, without however settling whether the taxes were considered direct or indirect.
/134/ James Madison, Debate in House of Representatives, 3 Annals of Congress 729-730 (May 29, 1794) (announcing he would vote against an unapportioned tax on carriages because it was unconstitutional and taxing without apportionment would 'break down one of the safeguards of the Constitution').
/135/ Wolcott at 414, 423, 427, 426 431 (1796) (Connecticut, Pennsylvania, New Jersey and Virginia taxes on carriages included in Treasury inventory of 'direct taxes.').
/136/ Alexander Hamilton, Brief for Hylton v. United States, in 8 Hamilton's Works 845, 846 (John Hamilton 1851).
/137/ Id.
/138/ Id. at 847.
/139/ Hylton v. United States, 3 U.S. (Dallas) 171, 174 (1796) (Chase, J.) (italics omitted).
/140/ Id. at 181 (Iradell, J.) (italics in original).
/141/ Id. at 179.
/142/ Richard Ellis, James Wilson, 4 Encyclopedia of the American Constitution 2067 (1986).
/143/ James Wilson, Debate in the Continental Congress (July 30 , 1776), Thomas Jefferson's Notes of Proceedings in Congress, 4 Delegates at 440 (arguing that slaves and freemen were both labourers who should be included in the population count for taxes); James Wilson (Pa.), 1 Farrand at 587 (arguing that wealth and population would have the same impact on apportionment); James Wilson, Debate in the Pennsylvania Ratifying Convention (Dec. 4, 1787) in 2 Elliot 483 reprinted in 3 K&L 116. (population best available measure of wealth).
/144/ James Wilson, Speech in the State House Yard, Philadelphia (Oct. 6, 1787) in RSC Pa 167, 171, 1 CC 342-343 (saying that although impost will probably be sufficient, Congress needs power of direct taxes within reach in cases of emergency and that there is no more reason to fear direct taxes than an impost).
/145/ See, e.g., the New Jersey Plan, proposed by William Paterson in CD 251. William Paterson (New Jersey), Debate at the Federal Convention (July 9, 1787) in 1 Farrand 561 (arguing that he could look at slaves in no way other than as property because they were entirely at the will of their master). See generally Richard Ellis, 'William Paterson,' 3 Encyclopedia of the American Constitution 1367 (1986). See also Veazie v. Fenno, 75 U.S. (8 Wall.) 533, 546 (1870) (arguing that 'it may be taken as established by the testimony of Paterson,' what 'direct taxes' mean) (holding that a tax on bank securities was not direct).
/146/ Samuel Chase (Md.), Debate in the Continental Congress (30 July 1776), Thomas Jefferson's Notes of Proceedings in Congress, in 4 Letters of Delegates to Congress, 1774-1777 at 438-439 (Paul H. Smith, ed. 1979).
/147/ 4 Elliot 4-6, 7, 9, 10-11, 13-15, 27, 28, 32-33, 35-36, 37, 38- 42, 73-75, 91-92, 95-102, 104, 106-114, 125-131, 132-134, 144-149, 164-167, 170-172, 176-180, 185, 186, 192-198, 217, 218-223, 228-231, 241-242, 247, 248-249. Iradell's speeches and his pamphlet on behalf of the Constitution had also been important throughout the South. Richard E. Ellis, 'James Iradell' 2 Encyclopedia of the American Constitution 1000 (1986).
/148/ Edward B. Whitney, supra note 110, at 282 n. 4.
/149/ In the constitutional debates, Ellsworth had argued that Congress would avoid direct taxes because to raise money by direct tax, you must make people be provident, laying up money to pay the tax, and you must 'take away the tools of a man's business or the necessary utensils of his family.' Debates in the Connecticut Convention on Ratification (January 7. 1788) in RSC 547, 549. He argued that the impost would pay almost all of the federal expenses. Id. at 550. He argued that Congress would not exercise its authority over direct taxes unless a state defaulted on a requisition. Roger Sherman and Oliver Ellsworth to Governor Samuel Huntington, 'The Report of Connecticut's Delegates to the constitutional Convention' (Sept. 26, 1787) in 1 CC 470, 471. In so far as Ellsworth's nonparticipation represents even just a passive or reluctant acquiescence in the result, considering his original position, his role in Hylton shows his attitude toward direct taxes had became very much more flexible in consideration of the consequences.
/150/ 74 US. (7 Wall.) 433 (1868).
/151/ Id. at 446 (emphasis added).
/152/ 90 U.S. (23 Wall. ) 331 (1875) (upholding an unapportioned successions tax).
/153/ Id. at 843 (emphasis added).
/154/ 102 U.S. 586 (1881).
/155/ Id. at 600.
/156/ Letter of James Madison to George Thomas, January 29, 1789 in 2 The First Federal Election, 1788-1790 at 344 (Gordon DenBover, ed. 1984).
/157/ See supra notes 16-20, 65-69 and accompanying text.
/158/ U.S. Const., art I, section 2.
/159/ Hugh Williamson (originally delegate to the constitutional Convention from North Carolina), Debate in the House of Representatives, in 3 Annals of Congress 378-80 (Feb. 3, 1792) reprinted in 3 K&L 357. See also Edmund Pendleton, Debate in the Virginia Ratifying Convention (June 12, 1788 in 3 Elliot 300 (saying that by apportionment 'we are to pay our equal, ratable share only'); James Madison, Debate in the Virginia Ratification Convention (June 12, 1788) in 3 RSC-Va 1204, 1339, 1343 (arguing that apportionment will prevent Congress from imposing nonuniform or unequal taxes on tobacco or slaves that Northern states would escape); The Federalist No. 36 at 172 (Alexander Hamilton) (apportionment 'effectually shuts the door to partiality or oppression').
/160/ See supra note 109 and accompanying text.
/161/ See supra note 89 & 90 and accompanying text.
/162/ U.S. Const., art I, section 9.
/163/ Translated loosely, ejusdem generis means 'the list provides the meaning.' The maxim of ejusdem generis provides 'when general words like 'other direct tax' follow specific words such as 'capitation' , the general words are construed to embrace only objects similar in nature to those objects indicated by the preceding specific words. Norman J. Singer, Sutherland's Statues and Statutory Construction section 47.17 at 188 (5th ed. 1993).
/164/ See, e.g., 'The Federal Farmer,' 'Letter IX' (January 4, 1788) in 5 CC 294 (arguing that 'Congress having assigned to any state its quota, there will be nothing to prevent a system of tax laws being made unduly to ease some description of men and burden others.'); George Mason, Debates in the Virginia Ratification Convention (June 17,1788) in 3 RSC-Va 1342-43 (apportionment is 'no security whatsoever').
/165/ 157 U.S. 429 on rehearing 158 U.S. 601 (1895).
/166/ Edwin R.A. Seligman, The Income Tax: A Study of the History, Theory and Practice of Income Taxation at Home and Abroad 589 (1914). See also Mr. Justice Harlan (dissenter in Pollock), Letter to his sons, May 24, 1895 quoted in David G. Ferrule, 'Justice Harlan's Dissent in the Pollock Case,' 24 S. Cal. L. Rev. 175, 180 (1951). Arnold Paul, Conservative Crisis 170, 185 (1960) also argues eloquently that Pollock is an illegitimate decision.
/167/ 157 U.S. at 583.
/168/ Sidney Mitchell, Taxation in Medieval England 295 (1951) (tax, including in Nottinghamshire, probably based upon 'capacity to pay for different persons or areas paid different amounts').
/169/ U.S. Const., Amend. XVI.
/170/ Thomas Reed Powell, 'Stock Dividends, Direct Taxes and the Sixteenth Amendment,' 20 Colum. L. Rev. 535,538 (1920).
/171/ Stanton v. Baltic Mining Co., 240 U.S. 103, 112 (1916).
/172/ Nicol v. Ames, 173 U.S. 509, 519 (1898).
/173/ Knowlton v. Moore, 178 U.S. 41, 78 (1900).
/174/ Flint v. Stone Tracey Co., 220 U.S. 107, 150 (1906) (corporate income tax prior to 16th Amendment, which waived apportionment for all income taxes).
/175/ Cf. Edwin B. Whitney, supra note 109 at 291 (1907) (arguing that if Pollock is reversed it should be reversed along principled grounds that would not affect one tax only).
/176/ 158 U.S. at 618 (tax on rents from real estate is direct), 628 (tax on income from personal property is direct. See Boris Bittker & Lawrence Lokken, Federal Taxation of Income, Estates and Gifts at 1-17 n. 20 (2d ed. 1989) (arguing that tax on the income is tantamount to tax on the property is key to the decision).
/177/ 486 U.S. 1062 (1988) (holding that a nondiscriminatory tax on municipal bond interest would not be unconstitutional) overruling 157 U.S. 586 (tax on interest from state bonds considered by Pollock court to be directly on the state).
/178/ Id.
/179/ Eisner v. Macomber, 252 U.S. 189, 206 (1920) (stock dividend was capital, not income). See also, e.g., Cuba RR v. Edwards, 268 U.S. 628, 632 (1925) (government subsidy to railroad was capital and not income within 16th Amendment); Miles v. Safe Deposit Co., 259 U.S. 247, 252 (1922) (stock option could not be income). But see, Bruce Ackerman and Anne Alstott, The Stakeholder Society (forthcoming 1999) (proposing to give an $80,000 endowment to 18 year olds funded by federal tax on wealth.
/180/ See, e.g., Henry Ordower, 'Revisiting Realization: Accretion Taxation, the Constitution, Macomber and Mark to Market,' 13 Va. Tax Rev. 1 (1993) (arguing that taxation of economic improvements achieved while avoiding incoming cash can not be taxed constitutionally as income); Leon Gabinet & Ronald J. Coffey, 'The Implications of the Economic Concept of Income for Corporation- Shareholder Income Tax Systems,' 27 Case W. Res. L. Rev. 895, 926 (1977) (arguing that apportionment prevents shareholder tax on undistributed corporate earnings).
/181/ See, e.g., Congressman William Archer, Chairman of H. Ways & Means Comm., in Unofficial Transcript of Ways & Means Hearing on Tax Reform and Small Business (April 24, 1996), 96 TNT 85-29 (calling for repeal of the 16th Amendment so as to replace the income tax with a consumption tax). Assuming, reasonably, that a consumption tax is a direct tax, fitting within the 16th Amendment is the only hope for the constitutionality of a consumption tax.
/182/ See, e.g., Ackerman & Alstott, supra note 178.
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