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Historical Perspectives on the Federal Income Tax


  Capitation and other Direct Taxes

  By Apportionment

  Duties, Imposts, and Excises


United States Constitution, Article 1, Section 9, clause 4:
    No Capitation, or other direct, Tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.

United States Constitution, Article 1, Section 8:
    The Congress shall have power to lay and collect Taxes, Duties, Imposts and Excises, to pay the debts and provide for the common defense and general welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

United States Constitution 16th Amendment:
    The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration. (Ratified as 16th Amendment in 1913)

    History of Sixteenth Amendment

 Congressional Record-Senate, April 28, 1909, page 1568 (S.J.R. 25):
    “The Congress shall have power to lay and collect taxes on incomes and inheritances”.  (Rejected)

Congressional Record- Senate, June 17, 1909 page 3377 (S.J.R. 39):
    “The Congress shall have power to lay and collect direct taxes on incomes without apportionment among the several States according to population.” (Rejected):

Congressional Record-Senate June 28,1909 page 3900 (S.J.R. 40):
    “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States and without regard to any census or enumeration.” (Adopted)

 Proposed amendment to S. J. R. 40 by Senator McLauren on July 5, 1909, page 4109:
    “Amend the joint resolution by striking out all after line 7 and inserting the following to wit:  The words ‘and direct taxes’ in clause 3, section 2, Article 1, and the words “or other direct,’ in clause 4, section 9, Article 1, of the Constitution of the United States are hereby stricken out.”  Rejected page 4120

S.J.R. 40 was adopted by the House on July 12, 1909 and assumed to be ratified by the States in February of 1913.

This information is found in Senate Document-61-2 Volume 58, book 5657.   On page 2, under the Title “Different Kinds of Taxation”.   The author gives us this perspective on the Taxing powers granted to Congress by the Constitution:

    “The difference between a tax upon property of any and every kind- which is and must be, inherently direct- and taxes imposed in the form of duties and excises is obvious in principle as well as in fact.   The first kind of tax is and always must be upon thing and rights, while the second is and always must be upon the doing of something which each person may do or refrain from doing at his own will and pleasure.
    The land, the goods, or the money of a member of the community can not escape taxation by change of ownership, for the tax adheres to the thing or right, and whether one person or another has it is of no consequence whatever.  But with the tax in the form of a duty or excise it is very different.  In the case of a duty it is the voluntary act of the importer in bringing into this country the goods that fixes the tax upon him, and it is the same with excise taxes.
    No one is compelled by law to engage in the business of buying and selling merchandise, stocks, operating railways, or in any particular business whatever.  If he chooses to do so, he submits himself of his own choice to any excise tax that may be uniformly laid upon that particular kind of business.
    The framers of the Constitution clearly understood these distinctions and provided for the security of the internal rights of the people of the several States accordingly by requiring that in the imposition of poll and other direct taxes they should be apportioned among the several States according to population, thus securing to the minorities of the people equality with the majorities of the people electing the House of Representatives, and thus controlling the kind and amount of levies made.”

    The 16th Amendment was not adopted or ratified to change these principles, nor could it without repealing Article 1, Section 2, clause 3 and Article 1, section 9, clause 4 of the United States Constitution, through which “Life, Liberty and the Pursuit of Happiness” is guaranteed.  Senator Bailey made that point very clear on October 8, 1942.  His statement is taken from page 7934 of the Congressional Record:

    "I should like to make the record straight on that point.  All Federal taxes are indirect.  We will make no progress by making a distinction.  If we levied a direct tax it would have to be apportioned among the States under the Constitution.  For that reason there are no direct taxes levied by the Federal Government."



Capitation and other Direct,” Taxes, by Apportionment

 Definition:  “He gives, however, it appears to us, a definition which covers the question before us.  A tax upon one’s whole income is a tax upon the annual receipts from his whole property, and as such falls within the same class as a tax upon that property and is a direct tax in the meaning of the Constitution.”   (Chief Justice Fuller in Pollock v. Farmers 158 U.S. 601 @ 625-26)

 Definition:  “Upon the person simply without any reference to his property, real or personal, or any business in which he may engage, or to any employment which he may follow.  It is rightfully imposed, because of the protection which the government affords to the person independently of the connection in relation of the person to anything else.”  (Gardner v. Hall, 61 N.C. 21 Pollock v. Farmers 157 U.S. 427 @ 774)

 “I think the word “direct” there must be construed with reference to the word “Capitation”.   A Capitation Tax is a tax that is levied directly upon the individual without reference to property.   It is what is called in the States generally a “Poll Tax”.   When you speak of a “Capitation” tax as a direct tax then speak of “other direct taxes” the word “direct” in this connection must be construed ejusdem generis with reference to the word “Capitation” ---a Capitation” Tax; that is, a direct tax which operates upon the individual himself, without reference to any property at all---and the words “or other direct” of course, always, by the rules of construction, must be construed to mean a tax of the same kind.   Other direct taxes, that operate upon the individual without reference to any property at all.   Out of that confusion has grown all the trouble that has arisen in reference to the question of an income tax."  (Senator McLauren, Congressional Record - Senate July 5, 1909, Page 4109)

Brushaber v. Union Pacific Railroad (1915) 240 U.S. 1, Chief Justice White:
“But it clearly results that the proposition and the contentions under it, if acceded, would cause one provision of the Constitution to destroy another; that is, they would result in bringing the provision of the Amendment exempting a direct tax from apportionment into irreconcilable conflict with the general requirement that all direct taxes be apportioned…
…the purpose was not to change the existing interpretation except to the extend necessary to accomplish the result intended; that is, the prevention of the resort to the source from which a taxed income was derived in order to cause a direct tax on the income to be a direct tax on the source itself, and thereby to take an income tax out of the class of excise, duties and imposts, and place it in the class of direct.”

Stanton v. Baltic Mining Co. (1915) 240 U.S. 103, page 112
“But, aside from the obvious error of the proposition, intrinsically considered, it manifestly disregards the fact that by the previous rulings it was settled that the provisions of the 16th Amendment conferred no new power of income taxation, but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect* taxation to which it inherently belongs.” (* Duties, Imposts and Excises)

Congressional Record-Senate, Volume 88, October 7, 1942, page 7901.  Senator Burton:
“In the case of Brushaber v. Union Pacific Railroad (240 U.S. 1) and Evans v. Gore (253 U.S. 245), the Supreme Court pointed out that the sixteenth amendment did not change the law.  The sixteenth amendment was not an attempt to change the law, but to provide that thereafter income taxes should not be regarded as direct taxes, and therefore should not be apportioned among the several States in accordance with population.”

Congressional Record-Senate, Volume 88, October 8, 1942, page 7928.  Senator Austin of Vermont:
“In Evans v. Gore, a case in which Mr. Justice Vandevanter rendered the opinion… and said, after carefully examining the sixteenth amendment, that the situation was not remedied by the words ‘from whatever source derived,’ no new power being granted by the amendment.”

The word “Direct”, in the dictionary sense, means: “operating without an intervening agency or step.”  In the Constitutional sense, it refers to the intention of Congress, i.e. Congress intends to tax the person on what he owns rather than tax what the person does.  A direct tax on income is not a “direct” tax on the person, because the person is not the object of the tax.  Whereas, a “direct tax” on the person, is owed by that person, regardless of whether or not they have “income” to pay it with.

The term: “from whatever source derived” does not circumvent the requirements of “direct taxes” by the removal of the requirement for apportionment.  The words “from” and “derived” both mean direction of travel and both exclude the point of origin.  The term “source” has two distinct meanings in reference to taxes.  First, where the money came from and second, what produced the money.  The Tax Code is not concerned about who or where the money came from, only about what produced the money.  The tax is levied upon “income”, from whatever source derived, it is not levied upon the source of the income i.e. whatever produced the income.  “Source” then only refers to “capital” and or “labor”, thus the definition: “income is the gain derived from, capital, from labor or both combined.”


By Apportionment:

Article 1, Section 2, Clause 3:

Representatives and direct Taxes shall be apportioned among the several States which may be included within the Union, according to their respective numbers, which shall be determined by adding to the whole number of free persons, including those bound to service for a term of years, and excluding Indians not taxed, three fifths of all other persons.]  The actual enumeration shall be made within three years after the first meeting of the Congress of the United States, and within every subsequent term of ten years, in such manner as they shall by law direct.   The number of Representatives shall not exceed one for every thirty thousand, but each State shall have at least one Representative.

Apportionment:  Webster’s New Encyclopedic Dictionary 1996
 Apportion:  To divide and distribute proportionately
 Apportionment:  The apportioning of Representatives or taxes among States or districts according to population.     (in this way the states knew from their respective populations how many Representatives they would have and how much of a direct tax they would be responsible for paying)

 In order for Congress to levy a “Capitation, or other direct, Tax” they must first establish the amount of tax dollars to be collected, for this is what is to be apportioned according to population (2).  Second, they must determine whether the tax will be assessed upon “people” (capitation) or upon “property” (or other direct).  Third, this amount of tax is divided among the several States on the basis of their respective populations and the States can elect to pay the tax out of their own treasury.  Or, if the States refuse, Congress can collect the tax directly from the population based upon the per-capita, per-acre or per-whatever “object” they made the assessment upon. (See the Congressional Record of April 28,1909, page 1569-70, Senator Brown of Nebraska)

 “By the census of 1890, the population of the United States was 62,622,250.  Suppose Congress desired to raise by an income tax the same number of dollars, or the equivalent of $1 from each inhabitant.  Under this system of apportionment, Massachusetts would pay $2,238,942. , South Carolina would pay $1,151,149.  Massachusetts has, however, $2,803,645,447 of property, with which to pay it, or $1,252 per capita, while South Carolina has but $400,911,303 of property, or $348 to each inhabitant.  Assuming that the same amount of property in each State represents a corresponding amount of income, each inhabitant of South Carolina would pay in proportion to his means three and one-half times as much as each inhabitant of Massachusetts. By the same course of reasoning, Mississippi, with a valuation of $352 per-capita, would pay four times as much as Rhode Island, with a valuation of $1,459 per-capita.  North Carolina, with a valuation of $361 per-capita, would pay about four times as much, in proportion to her means, as New York, with a valuation of $1,430 per-capita; while Maine, with a per-capita valuation of $740, would pay about twice as much.  Alabama, with a valuation of $412 would pay nearly three times as much as Pennsylvania, with a valuation of $1,177 per-capita.  In fact, there are scarcely two States that would pay the same amount in proportion to their ability to pay.” (Congressional Record of April 28, 1909, page 1570)

 “But the acceptance of the rule of apportionment was one of the compromises which made the adoption of the Constitution possible, and secured the creation of that dual form of government, so elastic and so strong, which has thus far survived in unabated vigor.   If by calling a tax indirect when it is essentially direct, the rule of protection could be frittered away, one of the great landmarks defining the boundary between the Nation and the States of which it is composed, would have disappeared, and with it one of the bulwarks of private rights and private property.” (Chief Justice Fuller, Opinion of the Court, Pollock v. Farmers 157 us 427 @ 583)

The taxation of people and or property was reserved to the States as their primary method of raising revenues and the rule of apportionment was adopted to protect their sovereignty.  The 16th Amendment did not repeal that regulation.  By removing the regulation of apportionment it merely clarified the existing Federal power of indirect taxation.  By placing the tax upon “income” i.e., the gain or profit derived from, it secured the distinction between a tax levied upon people or property and the same tax levied upon what people do with property.


Duties, Imposts and Excises”, by Uniformity

Excise Taxes:

Excise:  Webster’s New Encyclopedic Dictionary:
Excise: an internal tax levied on the manufacture, sale and consumption of a commodity within the country.

Excise Tax:  Hyde v. Continental Trust 157 U. S. 586 (1895):
 Excises are a species of tax consisting generally of duties laid upon the manufacture, sale or consumption of commodities within the country; or upon certain callings or occupations, often taking the form of exaction for licenses to pursue them.”

Excise Tax: Thomas v. United States 192 U.S. 363 (1904):
 “There is no occasion to attempt to confine the words duties, imposts and excises to the limits of precise definition.  We think that they were used comprehensively to cover customs and excise duties imposed on importation, consumption, manufacture and sale of certain commodities, privileges, particular business transactions, vocations, occupations and the like.”

    To illustrate this point I refer to the case of United States v. Philadelphia, B. & W. R. Co. 262 F188 (1920).   This case involves the Corporate Excise Tax of 1909.  District Judge Dickinson says:

    “There is, of course, a fundamental difference between an income tax and an excise tax, both with respect to what is taxed and the source and power to tax.
    [4] We are concerned wholly with an excise tax.   Whether it is a scientifically accurate concept of it or not, the concept of it as a charge for the privilege of following an occupation or trade, or carrying on a business, gives us a fairly good working idea of what it is.  It is in consequence, an indirect tax, and has no reference to earnings or income, except that the sum of such earnings or income may (as anything else may) be made the measure of the tax.  An income tax on the contrary, is a direct tax imposed upon the thing called income, and is directly imposed as is a tax on land.”

    The confusion we have today, I believe, is predicated upon Chief Justice Fuller’s explanation of the Pollock decision and our belief that the 16th Amendment is a “direct tax”.  The confusion involves the distinction between “Income” and “gains and profits, between “gains and profits” and “Compensation for services”, and between “wages” and “income”.

     “We have considered the Act only in respect of the tax on income derived from real estate, and from invested personal property, and have not commented on so much of it as bears on gains and profits from business, privileges, or employment’s, in view of the instances in which taxation on business, privileges, or employment’s has assumed the guise of an excise tax and been sustained as such.” (Pollock v. Farmers 158 U.S. 601 @ 635)



Uniformity:  U. S. Constitution Article 2 Section 8:
 “…but, all Duties, Imposts and Excises shall be uniform throughout the United States.”

 “…the phraseology of the previous resolution was changed so as to cause the word to have merely a geographical significance, viz., to require that whatever subject of taxation was assessed, the same subject should be taxed in every state, or, in other words, that the particular tax should operate generally throughout the United States.”
 (Knowlton V. Moore 178 US 41 @ 85-86)

 “…but, simply requires whatever plan or method Congress adopts for laying the tax in question, the same plan and the same method must be made operative throughout the United States; that is to say, that wherever a subject is taxed anywhere, the same must be taxed everywhere throughout the United States, and at the same rate.” (Knowlton Supra)

Uniformity:  United States v. Singer, 15 Wall. 111,121

 “The law is not in our judgment subject to any constitutional objection.  The tax imposed upon the distiller is in the nature of an excise, and the only limitation upon the power of Congress in the imposition of taxes of this character is that they shall be uniform throughout the United States.   The tax here is uniform in its operation; that is, it is assessed equally upon all manufactures of spirits, wherever they are.   The law does not establish one rule for one distiller and a different rule for another, but, the same rule for all alike.”

 “The tax is uniform when it operates with the same force and effect in every place where the subject of it is found.”  Justice Miller  Edye v. Robertson  Head Money Cases 112U. S. 580, 594

 The word “income” has only one definition as far as the 16th Amendment is concerned and that definition must apply to each an every “source” regardless of who or what or how it is derived.  (Income, from whatever source derived)  The income derived from property, from corporate and business activity and from labor must be determined in the same manner for all, and therefore, the tax must be applied to the same end result. Otherwise, the tax is not upon “income, from whatever source derived”, it is upon the source and defined by that source.  United States Attorney General Richard Olney clarified this “uniformity” as between Individuals and Corporations. (From the Pollock Cases 157 U.S. 427):

“In the present case there is no lack of uniformity as between corporations and individuals.  The exemption of $4,000 a year in the case of individuals or families, as will be shown, is intended as a compensation for the necessarily excessive burden of consumption taxes upon small and moderate incomes.
There is no such situation in the case of a business corporation.  Every cent which it expends is allowed it.  It is taxed only upon its net profits, deducting the wages account; which corresponds to the living expenses of the individual.”

To further dramatize this picture, Justice Harlan, in his dissenting opinion 158 US 601 @ 675-6 gives us this food for thought:

“If the exemption had been placed at $1,500 or even $2,000, few, I think, would have contended that Congress, in doing so, had exceeded their powers.  In view of the increased cost of living at this day, as compared with other times, the difference between either of those amounts and $4,000 is not so great as to justify the courts in striking down all of the income tax provisions.  The basis upon which such exemption rests is that in taxing incomes, such exemption should be made as will fairly cover the annual expenses of the average family, and thus prevent the members of such families becoming a charge upon the public.  The statute allows corporations, when making returns of their net profits or income, to deduct actual operating and business expenses. Upon like grounds, as I suppose, Congress exempted incomes under $4,000.

Income is the gain (or profit) derived from commercial activities, business and the use or sale of real estate and personal property.  The “exemption” represents the personal expenses of the individual, in comparison to the corporation’s, and thereby makes the tax on “income” uniform between the two.  The “exemption” also prohibits the “Income Tax” from becoming a direct tax upon the individual.


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