Direct Taxation, Hylton v. United States

[A18]

Hylton v. United States, 3 U.S. 171 (1796)

The Congress levied, according to the rule of uniformity, a specific tax on carriages.

The Court upheld the tax, and the justices advanced the view (in dicta) that the definition of a "direct" tax should be confined to those on land and people.

[Emsworth]

The Court reached the correct conclusion.

The term "direct tax" is extremely vague; its original meaning is somewhat unclear. However, there is plenty of support for the view that only capitations and taxes on land are direct. Whenever Congress imposed a capitation or tax on real property, it did so in accordance with the rule of apportionment. Whenever it imposed a tax on personal property, however, it did so in accordance with the rule of uniformity. Thus, it would seem that Congresses of the late eighteenth and early nineteenth century interpreted the taxation clauses in this manner.

Furthermore, James Kent, the Chancellor of New York, wrote: "[T]he direct taxes contemplated by the Constitution were only two; viz., a capitation or poll tax and a tax on land."

[A18]

Constitutionally unsound.

The direct taxes provision was clearly intended to have bite. If it applies only to capitations and taxes on land, it is almost superfluous. Indeed, if that were the case, the Constitution would presumably provide that "No Capitation, or Tax on land shall be laid..." This is not what it says.

I would argue that indirect taxes, which the framers assumed would fund the fed in ordinary circumstances, were "Duties, Imposts and Excises" -- taxes on consumption. These taxes are "safe" because if Congress gets greedy, fewer taxed goods would be purchased. See Federalist No. 21.

Direct taxes, such as taxes on income and personal property, do not have this built-in protection. They are subject to apportionment among the several states, according to their respective populations.

[Emsworth]

I would argue that indirect taxes, which the framers assumed would fund the fed in ordinary circumstances, were "Duties, Imposts and Excises" -- taxes on consumption.

I would disagree. The Constitution states, "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises," and not, "The Congress shall have Power To lay and collect Direct Taxes, Duties, Imposts and Excises." It follows that there are some taxes that are neither duties nor imposts nor excises, but are not direct taxes either. As Justice Story wrote:

[T]wo rules are prescribed, the rule of apportionment (as it is called) for direct taxes, and the rule of uniformity for duties, imposts, and excises. If there are any other kinds of taxes, not embraced in one or the other of these two classes, (and it is certainly difficult to give full effect to the words of the constitution without supposing them to exist,) it would seem, that congress is left at full liberty to levy the same by either rule, or by a mixture of both rules, or perhaps by any other rule, not inconsistent with the general purposes of the constitution.

Thus, it would follow that there are indeed indirect taxes that are not duties, excises, or imposts.

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The clause was not meant to guard against congressional greed; it was meant to appease the southern states. As Justice Paterson wrote, "The southern states, if no provision had been introduced in the constitution, would have been wholly at the mercy of the other states. Congress in such case, might tax slaves, at discretion or arbitrarily, and land in every part of the Union, after the same rate or measure: so much a head, in the first instance, and so much an acre, in the second. To guard them against imposition, in these particulars, was the reason of introducing the clause in the constitution, which directs that representatives and direct taxes shall be apportioned among the states, according to their respective numbers."

[A18]

Why would it say direct taxes? I would argue that the word "direct," in the apportionment requirement, is simply intended to exclude "Duties, Imposts and Excises," which the Constitution earlier mandated must be levied according to the rule of uniformity.

With regard to Paterson's quote, I agree that all of those things are included. I simply would not limit "direct taxation" to them only.

[Emsworth]

Indeed, if that were the case, the Constitution would presumably provide that "No Capitation, or Tax on land shall be laid..." This is not what it says.

Well, there were a few other taxes that were deemed direct, such as a tax on houses, buildings, and other permanent fixtures on the land.