CITES BY TOPIC:  direct tax
Merriam Webster's Dictionary of Law, (c ) 1996

“direct tax.  a tax imposed on a taxpayer himself or herself or on his or her property (compare excise)”


PDF Congressional Globe, 41st Congress, Second Session, pp. 446-447

Mr. Reeves of the House or Representatives very succinctly and clearly explains the meaning of "direct taxes" in the context of the Constitution.  See the document also at:

http://memory.loc.gov/cgi-bin/ampage?collId=llcg&fileName=095/llcg095.db&recNum=519


PDF First Apportioned Direct Tax, 12 Stat. 292-313, 37th Congress, Session 1, pp. 292-313


Flint v. Stone Tracy Co., 220 U.S. 107, 119 (1911):

"Any tax when placed on the right of the man or of the corporation to live is a capitation tax and as direct as any tax can be."

[Flint v. Stone Tracy Co., 220 U.S. 107, 119 (1911)]


Pacific Ins. Co. v. Soule, 74 U.S. 433 (1868)

The ordinary test of the difference between direct and indirect taxes, is whether the tax falls ultimately on the tax-payer, or whether, through the tax-payer, it falls ultimately on the consumer. If it falls ultimately on the tax-payer, then it is direct in its nature, as in the case of poll taxes and land taxes. If, on the contrary, it falls ultimately on the consumer, then it is an indirect tax.

Such is the test, as laid down by all writers on the subject. Adam Smith, who was the great and universally received authority on political economy, in the day when the Federal Constitution was framed, sets forth a tax on a person's revenue to be a direct tax. 5 Mill,6 Say,7 J. R. McCulloch,8 Lieber,9 among political economists, do the same in specific [74 U.S. 433, 438] language. Mr. Justice Bouvier, in his learned Law Dictionary, defines a capitation tax, 'A poll tax; an imposition which is yearly laid on each person according to his estate and ability.'

Indeed, it is obvious that an income tax, levied on the profits of any business, does not fall ultimately on the consumer or patron of that business, in any other sense than that in which a poll tax or land tax may be said ultimately to fall, or be charged over by the payer of those taxes upon the persons with whom and for whom they do business, or to whom they rent their lands. The refinement which would argue otherwise, abolishes the whole distinction, and under it all taxes may be regarded as direct or indirect, at pleasure.

But, if the distinction is recognized (and it must be, for the Constitution makes it), then it follows, that an income tax is, and always heretofore has been, regarded as being a direct tax, as much so as a poll tax or as a land tax. If it be a direct tax, then the Constitution is imperative that it shall be apportioned.

If it be argued that an income tax cannot be apportioned, then, it cannot be levied; for only such direct taxes can be levied as can be apportioned.

But an income tax can be apportioned as easily as any other direct tax; first, by determining the amount to be raised from incomes throughout the United States, and then by ascertaining the proportion to be paid by the people of each State. An income tax, in the matter of its apportionment, is not embarrassed by any other difficulties than those which grow out of apportionment, in the admitted cases of poll taxes and land taxes.”

[Pacific Ins. Co. v. Soule, 74 U.S. 433 (1868)]


Veazie Bank v. Fenno, 75 U.S. 533 (1869):

“This review shows that personal property, contracts, occupations, and the like, have never been regarded by Congress as proper subjects of direct tax.

It may be rightly affirmed, therefore, that in the practical construction of the Constitution by Congress, direct taxes have been limited to taxes on land and appurtenances, and taxes on polls, or capitation taxes.”

[Veazie Bank v. Fenno, 75 U.S. 533 (1869):]


Pollock v. Farmer’s Loan & Trust Co., 157 U.S. 429 (1894), 557, Thomas v. United States (1903) 192 u.s. 363, 370:

"And although there have been, from time to time, intimations that there might be some tax which was not a direct tax, nor included under the words 'duties, imports, and excises,' such a tax, for more than 100 years of national existence, has as yet remained undiscovered, notwithstanding the stress of particular circumstances has invited thorough investigation into sources of revenue. [157 U.S. 429, 558]   The first question to be considered is whether a tax on the rents or income of real estate is a direct tax within the meaning of the constitution. Ordinarily, all taxes paid primarily by persons who can shift the burden upon some one else, or who are under no legal compulsion to pay them, are considered indirect taxes; but a tax upon property holders in respect of their estates, whether real or personal, or of the income yielded by such estates, and the payment of which cannot be avoided, are direct taxes. Nevertheless, it may be admitted that, although this definition of direct taxes is prima facie correct, and to be applied in the consideration of the question before us, yet the constitution may bear a different meaning, and that such different meaning must be recognized. But in arriving at any conclusion upon this point we are at liberty to refer to the historical circumstances attending the framing and adoption of the constitution, as well as the entire frame and scheme of the instrument, and the consequences naturally attendant upon the one construction or the other." 

[Pollock v. Farmer’s Loan & Trust Co., 157 U.S. 429 (1894), 557, Thomas v. United States (1903) 192 u.s. 363, 370: ]


Knowlton v. Moore, 178 U.S. 41 (1900):

“Direct taxes bear immediately upon persons, upon the possession and enjoyment of rights; indirect taxes are levied upon the happening of an event as an exchange.”

[Knowlton v. Moore, 178 U.S. 41 (1900):]


The Constitutional Requirements of Uniformity in Duties, Imposts, and Excises, 9 Yale Law Journal 164, 169 (1900):

“It is conceded by the court that Congress may lawfully impose direct taxes in the District for District purposes, without regard to the rule of apportionment, and that Congress is under no constitutional necessity to impose direct taxes by the rule of apportionment upon the District of Columbia, or upon the territories, even though such a direct tax is laid upon the States.”  [William Bradford Bosley, The Constitutional Requirements of Uniformity in Duties, Imposts and Excises, 9 Yale Law Journal 164, 169 (1900)]


Constitutional Income:  Do You Have Any?;  Phil Hart, pp. 168-171:

“Summarizing what we have learned from this chapter, we can establish the following test:  When any tax includes all the following elements, it is a direct tax:

  1. Either it places a tax on the whole of something because of ownership and falls on the owner of the thing taxed, or it is a tax on a species of property or on a natural person, a tax on the existence of the thing taxed.
  2. The thing or the person taxed is diminished by the tax.
  3. The tax cannot be shifted.
  4. It is not a tax on consumption, nor a tax on an identified activity, nor a tax on a privilege, nor a tax on the happening of an event.

"Any tax that does not satisfy these elements is not a direct tax and is therefore an indirect tax.  Consequently, the Supreme Court went too far in the Pollock Decision as a tax on the net income of real estate is not a tax on the ownership of the real estate.  Income from real estate is the fruit of the invested capital; it is the net.  It may be severed from the capital leaving the underlying investment whole.  When only income is taxed, the underlying investment is not diminished.  The tax on the income from real estate may be shifted to those who pay the rents.  The tax on the income from real estate may not even be payable by the owner of the real estate if there were some kind of management arrangement in place where the owner does not receive the income stream.  Nor is it a tax on the existence of the real estate, as the amount of the tax is measured by the degree to which the property is successfully managed.  It does not fall on the ownership of the real estate.  A successfully managed building may pay a lot of tax while an identical building next door, that is poorly managed, might not pay any tax at all.  Clearly the Pollock tax was not levied on the ownership nor the value of the building.  Tax in the Pollock Case was an indirect tax and the Supreme Court went too far in linking an inherently indirect income tax with the source of the income.  The boundary line between the two being that point where the underlying asset is diminished by the tax.  The purpose of the 16th Amendment was to overturn Pollock.

"To my knowledge,  the question of whether or not a tax on a man's wage or salary is an indirect tax or a direct tax has never been before the Supreme Court, except in the case of Evans v. Gore.  Evans v. Gore was a 1920 case about a federal judge who was having his salary diminished by an income tax and the Supreme Court ruled the tax was unconstitutional.  But the question in this case related to a constitutional provision affecting only federal judges.  Since most of us reading this book are not federal judges, Evans v. Gore does not affect us.  But the Court has discussed the issue three times in its dicta.

"The first time was in the Hylton Case, 1796, where they quoted with approval Adam Smith in stating that a tax on  a man's revenue is a direct tax.  The second time was in the Springer v. United States, 1880, where Springer failed to put this question directly in front of the court.  It is unfortunate that Springer made numerous strategic errors in prosecuting his case.  The third time was in Pollock, 1895, where the court said, quoting with approval Springer:

"While this language is broad enough to cover interest as well as the professional earnings, the case would have been more significant as a precedent if the distinction had been brought out in the report and commented on in arriving at judgment, for a tax on professional receipts might be treated as an excise or duty, and therefore indirect, when a tax on the income of personalty might be held to be direct."  [Pollock v. Farmers' Loan & Trust, 157 U.S. 529, 579 (1895)]

"The reality of a tax on a man's labor was very well described by Senator Bailey of Texas as he debated the income tax amendment [16th Amendment].  Senator Bailey had one of the more vocal voices in this debate.  As a Democrat he was an avid supporter of the 16th Amendment.  Here is his statement:

"I believe in earning an income by personal service every man consumes a part of his principal, and that fact ought always to be taken into consideration.  The man who has his fortune invested in securities may find in a hundred years, if he spent his income, that the fortune still intact, but the lawyer or the physician or the man engaged in other personal employment is spending his principal in earning his income.  That fact ought under every just system of income taxation to be recognized and provided against."  [44 Cong.Rec. 4007 (1909)]

"A tax on the labor of a man, whether or not he is a construction worker or a rocket scientist, is a tax on the man.  It is a species of a capitiation tax.  Adam Smith described it as a capitiation tax and a direct tax.  It diminishes the man as the man consumes part of his capital in earning his wage or salary.  It is a direct tax.  Such a tax in the post 16th Amendment era must be apportioned among the 50 states before it can be colleted from those who, absent a privilege, work and live within the several States of the Union.

"A tax on a privilege, although measured by income, is not an income tax either.  It is an excise tax.  The tax of the Spreckels Sugar Case from the Spanish-American War and the Corporate Excise Tax of 1909 are such taxes.  The 16th Amendment provides no authority for such a tax.  These taxes are levied under the authority of the original Constitution, not the 16th Amendment.

"An income tax within the meaning of the 16th Amendment is a tax on net income.  It is not a tax on a privilege nor is it a tax on a source.

"There are many species of income taxes.  As Professor Seligman said, "An income tax can be direct or it can be indirect."  It would be a whole lot less confusing if we would stop calling a gross receipts tax an income tax.  It is not, as the tax does not fall on income, but instead falls on the source of the income."