Copyright 1987 Vern Holland


8141 E. 31st St.. Suite F Tulsa. OK 74145


No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means -- electronic, mechanical, photocopy, recording, or otherwise -- without the express prior permission of F.E.A. Books, with the exception of brief excerpts in magazine articles and/or reviews.

Printed in the United States of America

* * *

This book is designed to provide the author's findings and opinions based upon research and analysis of the subject matter covered. This information is not provided for purposes of rendering legal or other professional services, which can only be provided by knowledgeable professionals on a fee basis.

Further, there is always an element of risk in standing up for one's lawful rights in the face of an oppressive taxing authority backed by a biased judiciary.

Therefore, the author and publisher disclaim any responsibility for any liability or loss incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.

To Megan, Ashley, and Nicholas


The thousands of hours of research that have gone into this book would never have occurred had it not been for the support and encouragement of several special people. First, I would like to thank Billie Murdock and Larry Becraft whose devotion to our cause and willingness to share the fruits of their personal research helped me put the pieces of this puzzle together. Secondly, Kevin O'Brien made invaluable contributions both as a sounding board during the research phase and as a proof reader while the book was being physically put together. And finally, thanks to Dave Mauldin who pulled cases and helped with the editing. Without this team effort, the hidden flicker of truth contained within these covers might have died and been lost forever. Now the hope is that this truth might be fanned into a bonfire loosing the chains of government.

Vern Holland Tulsa, Oklahoma September 24, 1987



TABLE OF CONTENTS................................... i

INTRODUCTION........................................ v

Chapter I

CONFUSION IN THE COURTS........................... 1

Chapter II



EXPLAINED AND DISTINGUISHED....................... 7

Constitutional Convention Not A

Legislative Body................................ 15

Chapter III




THE HISTORICAL EVIDENCE........................... 23

The Beginnings.................................. 24

The Eighteenth Century.......................... 27

The Question of Whether a General Tax on Income is a Direct Tax Cannot Be Deemed Settled Until It is Decided in Accordance with the Plain Meaning of the Constitution and the Dictates of Common Sense in a Case

Directly Presenting the Question................ 38

Articles of Confederation....................... 41

The Compromise of the New Constitution.......... 48

Chapter IV



What Has the Practical Construction Placed

Upon the Constitution by Men Contemporary

With its Formation. Who Were in Congress

From 1790 to 1815?.............................. 85

Chapter V


United States Supreme Court

3 U.S. (3 Dall.) 171 (1796)....................... 93

Trial Before the Circuit Court.................. 95

Argument in the United States Supreme Court..... 99

Apportionment As 'An Express Limitation'........ 110

Albert Gal latin and Secretary Wolcott........... 112

States vs. Territories.......................... 119

Hylton and Stare Decisis........................ 123

Chapter VI

THE CIVIL WAR INCOME TAX.......................... 125

The Constitutionality of the Various Civil War Tax Acts Considered by the

Supreme Court................................... 135

Springer v. United States

Supreme Court of the United States

102 U.S. 586 (1880)............................. 138

Chapter VII


United States Supreme Court

157 U.S. 429 (1894). reh. 158 U.S. 601 (1895)..... 147

The Founding Fathers Understood

the Language They Used.......................... 159

General Tax on Income Distinguished From

Certain Indirect Taxes Measured by Revenue...... 163

Chapter VIII

THE SIXTEENTH AMENDMENT........................... 169

Chapter IX




Brushaber v. Union Pacific Railroad Co.

United States Supreme Court

240 U.S. 1 (1915)............................... 179

Chapter X



Cutting the Thread of the

Springer Case................................... 197

Chapter XI

CONCLUSION........................................ 217


Table of Contents................................. 221

Appendix A........................................ 223

Appendix B........................................ 229

Appendix C........................................ 231

Appendix D........................................ 233

Appendix E........................................ 235


THE LAW THAT ALWAYS WAS provides an historical look into the subject of Federal income taxation from a constitutional perspective. The book's underlying purpose is to provide useful ammunition to those individual Americans who have taken upon themselves, at great sacrifice and expense, the personal endeavor to aid in the restoration of this great nation (via the elimination of the Federal income tax), to the sound political and economic foundations upon which the United States of America was established, exactly 200 years ago.

It is a privilege to make THE LAW THAT ALWAYS WAS available in the year 1987, the bicentennial anniversary of the birth of the United States Constitution, especially since the main focus of THE LAW THAT ALWAYS WAS is to prove that today's Federal income tax, as applied and enforced, is contrary to the clear intent of the framers of that great document.

In this 200th year of our great Republic, it is fitting for us to reexamine, or more appropriately, to reaffirm the principles upon which our Federal system was established under the Constitution. In examining these principles, it is important to recognize that there exists today, just as in 1787. two great forces which influence our constitutional system, each advancing its own ideological agenda.

The first great force influencing our constitutional system, which currently appears to hold the minority view, believes that the Constitution should be read, Interpreted and applied in light of the clear intent of the framers. This group views the document as timeless, written to withstand the forces of social and political change. Those with the conservative point of view believe that the values represented in the formation of the Constitution must be preserved, if the nation is to survive another centennial anniversary. They also largely believe that the Constitution, along with other documents of the period, were divinely inspired, and. like the Holy Bible, should be read literally, without "modern interpretation."

The second of the two great forces influencing our constitutional system currently enjoys the sanction of a majority of the Supreme Court, a majority of the entrenched ideologues in both Houses of Congress, and in the various institutions of American society (i.e.. the public school system, the news media, many religious denominations, etc.). They view the Constitution as either an antiquated document, or an evolving document (not necessarily evolving through the amendment process, but particularly evolving according to the social and political needs of the day). Their great advocate has been the United States Supreme Court, which, over the years, has seen fit to approve FDR's "New Deal" social welfare programs, under the auspices of the general welfare clause; has forced the integration of the State public school systems (forced busing), under the blanket of the Equal Protection Clause; has approved the murder of unborn babies, under the guise of the right to privacy; and has prohibited the use of prayer in schools, under the guise of Freedom of Religion. True constitutionalists have suggested that our Founding Fathers would have largely scoffed at such ideas, as these, being adopted by the high Court under a supposed sanction of the Constitution.

The advocates of the liberal point of view suggest that

the Framers. living in a different time, could not have envisioned the needs of our modern society, nor the changes which would occur over two centuries. The advocates of a strict construction of the intent of the Framers of the Constitution hold to the position that these were men of great vision, who recognized that in order for the people of America to live in harmony, they must live under a system of high moral values, and the Constitution is the thread which most effectively serves as the benchmark for maintaining the ideal. Without this ideal, a majority would be able to discard the absolutes and the values which have been responsible for nurturing and developing the greatest nation the Earth has ever known.

THE LAW THAT ALWAYS WAS begins by pointing out that modern Federal Appellate Courts cannot agree as to the source of the Congress' power to impose taxes upon incomes. This confusion is evidenced by the fact that some of the Federal Appellate Courts say that the income tax is an indirect tax authorized by Article I. Section 8, Clause 1 of the Constitution; while others claim that the income tax is a direct tax, relieved from the rule of apportionment by the Sixteenth Amendment; and still others claim that the question of whether the income tax falls under the direct or indirect class was eliminated by the unqualified language of the so-called "income tax amendment" because it removed any distinction which might have existed between the two great classes, when dealing with the subject of income taxation. Thus today's Courts say that the Federal income tax is an indirect tax, a direct tax and neither. THE LAW THAT ALWAYS WAS is written to address this confusion amongst the Courts and to prove, from an historical perspective that (1) the people who comprised the citizens of the several States, at the time of the adoption of the Constitution recognized an income tax as a direct tax; (2) the most respected of the political and economic writers of the period understood an income tax to be a tax of the most direct

kind; and (3) from as early in our constitutional history as the case of Hylton v. United States (1796), through the Civil War, onward through to the present, forces who are jealous of the minor limitations placed upon the taxing powers of Congress have attempted, with reasonable success, to cloud the meaning of the terms "direct tax" and "direct taxes" as used by the Framers of the Constitution. However, in spite of attempts to destroy the meaning of these terms and despite attempts to disguise the historical record, the evidence remains.

THE LAW THAT ALWAYS WAS proves that today's Federal income tax, at least in its application to the income of the Citizens of the States, is not based upon any new power granted by the Sixteenth Amendment. The Supreme Court, in Brushaber v. Union Pacific Railroad Co.. held that the effect of the amendment was to operate as a bar to advancing, in the future, an argument similar to that advocated by Charles Pollock, in Pollock v. Farmers Loan & Trust, wherein it was held that a tax upon the income arising from investments in real estate and personalty was, in effect, a direct tax upon those investments, because of the resulting burden placed upon the sources of the income, and thereby must be apportioned among the several States according to the direct taxing clauses of the Constitution. Even though counsel for both Brushaber and the Government argued that the amendment authorized an unapportioned direct tax upon incomes, the Court correctly refused to adopt such an interpretation, because to do so would cause irreconcilable conflict between the Sixteenth Amendment and the direct tax clauses of the Constitution.

THE LAW THAT ALWAYS WAS proves that the only time the question of the validity of an unapportioned tax upon professions, employments, and occupations (labor) has ever been before the Supreme Court was in 1880, where William M. Springer, a member of Congress, refused to pay the income tax imposed in 1865 by the Radical Republicans then occupying Congress during the Civil War (a.k.a. The War of Northern Aggression). In that case, the Court sustained

the tax as an indirect tax based upon the grounds that (1) they felt that the only direct taxes were those which could be fairly apportioned among the States; (2) they felt that an income tax could not be fairly apportioned because of the inequality of populations and incomes in the several States; and (3) the Congress, in nearly 100 years, had never imposed a tax upon incomes as a direct tax. The first two points relied upon were based upon the dictum of Hylton v. United States, wherein the Supreme Court held that a tax upon carriages was an indirect tax because the tax was based upon the use and not upon the ownership of the property. The Springer Court was relying upon the dictum of Hylton where Justices Chase, Paterson and Iredell, in separate opinions, each speculated that perhaps the only direct taxes contemplated by the Constitution were those upon real estate and capitation taxes. This unnecessary speculation by the 1796 Court was actually inconsistent with the point actually decided in that case.

THE LAW THAT ALWAYS WAS proves that the Hylton case was a "sham," "set-up" case, where Alexander Hamilton and his fellow Federalists conspired with Hylton to advance a contrived case where the parties would stipulate to a false set of facts. Hylton agreed to claim that he owned 125 carriages in spite of the fact that he owned only one. The government attorneys along with Hamilton argued both sides of the case with the intent of presenting the case in such a light that the government position would be given the most favorable light by the Court.

THE LAW THAT ALWAYS WAS proves that the dictum in Hylton, which became the building block in reaching the conclusion that a general tax on incomes was nothing but an indirect tax, was not based upon any reasonable construction of the theory of taxation held by the Framers of the Constitution, the political and economic writers of the period, nor was it supported by the practice of the several States before or after the adoption of the Founding document, nor was it supported by the

understanding of the Inhabitants of the newly united States at that time.

THE LAW THAT ALWAYS WAS proves that the constitutionality of the Federal income tax hangs on the thread of the integrity of Springer v. United States, which was based upon the noncommitting speculation (dictum) of Hylton v. United States, a case of questionable origin, which turned a blind eye to the then current practice of the several States, and the general understanding of those who comprised the People of the United States of America.

The purpose of this book is to reveal the truth about the source of the terms "direct tax" and "direct taxes", as used in the Constitution, and intent of the use of those words. These principles are then applied to today's income tax, as imposed upon the general income of citizens of the several States. It is the sincere prayer of the author that the information in this book will help to educate patriotic God fearing Americans as to the TRUTH about the THE LAW THAT ALWAYS WAS.

Chapter I


The practical construction of the Constitution, as relates to taxation, under which the United States Government has been acting since 1913, seems to proceed upon the idea that the "direct tax" clauses of the Constitution embrace only capitation or poll taxes and taxes upon lands, and that every other species of governmental assessment, including income taxes, that can be devised by the ingenuity of those who are solicitous to obtain money for the uses of the government is either a "duty." an "impost," or an "excise." Either this is the assumption, or else it is supposed that the Sixteenth Amendment authorized taxes which Congress is not required by the Constitution to lay, either according to the rule of apportionment or the rule of uniformity, but which it may lay under either of those rules, or under any other rule, at pleasure. For, it is to be remembered, that the Constitution, after having granted the general power of laying Taxes, Duties, Imposts, and Excises, has directed that capitation and all other direct taxes shall be laid by apportionment among the States according to the census; and that all duties, imposts, and excises shall be laid by the rule of uniformity; that is to say, so that the rule of assessment shall be the same in all parts of the Union, however various may be the total amounts which are collected in different States.


In fact, there is absolute chaos in the rulings of the United States Circuit Courts as to the effect of the Sixteenth Amendment of the United States Constitution even to the extent of overruling the United States Supreme Court.

The case of Ficalora v. C.I.R., 751 F.2d 85 (2nd Cir. 1984). states that the case of New York ex rel. Cohn v. Graves, 300 U.S. 308 (1937) in effect overruled Pollock v. Farmer's Loan and Trust Co.. 157 U.S. 429 (1894), reh. 158 U.S. 429 (1895), and in so doing rendered the Sixteenth Amendment unnecessary, when it sustained New York's income tax on income derived from real property in New Jersey. This case obviously said the Sixteenth Amendment is absolutely worthless to our Constitution and takes the position that an income tax is an indirect tax.

The Court in Simmons v. United States. 308 F.2d 160 (4th Cir. 1962). took the position that the Sixteenth Amendment relieved direct taxes upon income from the apportionment requirement of Article I of the Constitution.

The Court states in Keasbey & Mattison Co. v. Rothensies. 133 F.2d 894 (3rd Cir. 1943). that an "income tax" is a direct tax upon income.

The Court in White Packing Co. v. Robertson. 89 F.2d 775 (4th Cir. 1937). states that the tax is. of course, an excise tax, as are all taxes on income.

The Court states in Lonsdale v. C.I.R., 661 F.2d 71 (5th Cir. 1981). that the requirement to apportion a direct tax on income was eliminated by the Sixteenth Amendment.

Other Courts holding that the Sixteenth Amendment eliminated the requirement that direct income taxes be apportioned among the states are United States v. HcCarty, 665 F.2d 596 (5th Cir. 1982); Parker v. C.I.R., 724 F.2d 469 (5th Cir. 1984); Prescott v. C.I.R., 561 F.2d 1287 (8th Cir. 1977); Funk v. C.I.R., 687 F.2d 264 (8th Cir. 1982); Broughton v. United States, 632 F.2d 707 (8th Cir. 1980); Fairbanks v. C.I.R., 191 F.2d 680 (9th Cir. 1951); United States v. Stillhammer, 706 F.2d 1072 (10th Cir. 1983);

United States v. Lawson. 670 F.2d 923 (10th Cir. 1982).

The Court in United States v. Turano. 802 F.2d 10 (1st Cir. 1986), states that the prosecuting attorney incorrectly stated that the 16th Amendment had eliminated the Constitutional distinction between direct and indirect taxation since the Sixteenth Amendment only eliminated the distinction for income taxes.

A summary of the foregoing cases shows that the income tax is an indirect tax. a direct tax. and neither. Many of the above cases state that the Sixteenth Amendment authorized a "direct tax" on income, without apportionment, which in effect would overrule the United States Supreme Court in Brushaber v. Union Pacific Railroad Co., 240 U.S. 1 (1915) which stated that a "direct tax" could not be relieved from the regulation of apportionment. The Court in the Brushaber case was called upon to determine the meaning and effect of the Sixteenth Amendment. Counsel for Frank Brushaber advanced the argument, among others, that the Sixteenth Amendment authorized only a particular character of direct taxes without apportionment. Solicitor General Davis and Attorney General Gregory filed a brief for the United States, and took the position that the Sixteenth Amendment recognized that an income tax was a "direct tax" but removed the regulation of apportionment as follows:

I. Income taxes, at least when laid on income derived from real or personal property, are direct taxes, and therefore not subject to the uniformity rule. EXPRESSLY prescribed by the Constitution.

(a) It is settled that the uniformity requirement of clause 1 of section 8 of Article I of the Constitution, is limited to duties, imposts, and excises, and does not apply to direct taxes. (cites omitted) And the Pollock case, finally determines that a tax on income derived from either real or personal property is a direct tax. ...

(b) Apportionment being restricted to direct

taxes only, the Sixteenth Amendment, in removing that restriction, recognized any tax upon income "from whatever source derived" as a direct tax, and as such subject to the apportionment rule unless specially exempted. Appellee brief, pp. 11 - 12.

Both parties, therefore, were arguing that the Sixteenth Amendment removed the requirement of apportionment on some, if not all, direct taxes on income. This, of course, was the intent of Congress, which will be dealt with later. The Court destroyed these contentions at 240 U.S. at pp. 10-12:

"We are of opinion, however, that the confusion is not inherent, but rather arises from the conclusion that the 16th Amendment provides for a hitherto unknown power of taxation; that is, a power to levy an income tax which, although direct, should not be subject to the regulation of apportionment applicable to all other direct taxes. And the far-reaching effect of this erroneous assumption *** "But it clearly results that the proposition and the contentions under it, if acceded to, would cause one provision of the Constitution to destroy another; that is, they would result in bringing the provisions of the Amendment exempting a direct tax from apportionment into irreconcilable conflict with the general requirement that all direct taxes be apportioned. Moreover, the tax authorized by the Amendment, being direct, would not come under the rule of uniformity applicable under the Constitution to other than direct taxes, and thus it would come to pass that the result of the Amendment would be to authorize a particular direct tax not subject either to apportionment or to the rule of geographical uniformity, thus giving power to impose a different tax in one state or states than was levied in another state or states.

Could anything be clearer? The Sixteenth Amendment cannot relieve a "direct tax" from apportionment because Article I. Section 9. Clause 4 and Article I. Section 2. Clause 3 mandates that all "direct taxes" be apportioned!

Robert L. Zimmerman, Assistant U.S. Attorney, in the case of United States v. Stahl, C.A. No. 85-3069. Ninth Circuit, in his brief filed September 6, 1985, took the position that the income tax is an excise, and therefore, the Sixteenth Amendment is not the basis for Congress'power to levy direct income taxes on income from labor, but it is the basis for a direct nonapportioned income tax on property and income from personal investment.

Then there is a report being circulated from the Congressional Research Service, Library of Congress, by Howard M. Zaritsky, Legislative Attorney, American Law Division, Report No. 80-19 A, Some Constitutional Questions Regarding The Federal Income Tax Laws, which states at CRS-2:

"The status of the income tax has not always been clearly determinable from the decisions of the United States Supreme Court, though for the past sixty-four years the Court has taken the view that the Federal income tax is an indirect tax authorized under Article I, Section 8. Clause 1 of the Constitution, as amended by the Sixteenth Amendment to the Constitution. [Emphasis added]

Yes, now we have the Government stating that the Sixteenth Amendment amended Article I, Section 8, Clause 1 of the Constitution.

It is quite apparent that the following issues must be re-examined.

(1) What are "direct" and indirect taxes, as authorized by the United States Constitution?

(2) Does the historical evidence support a general tax on income as being a direct or indirect tax?

(3) Is a general tax on income a direct tax in the constitutional sense?

(4) What was the Congressional intent with the Sixteenth Amendment?

(5) Did the Sixteenth Amendment change the Constitution?

Chapter II



It is indisputable that the Constitution plainly recognizes the division of the Federal taxation which it authorizes into two great classes, and provides for the imposition of these two great classes of taxes respectively, upon entirely different bases. The original taxing clauses of the Constitution of the United States are:

"Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers..." Art. I, Sec. 2. Cl. 3.

"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States..." Art. I, Sec. 8, Cl. 1.

"No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumerated

herein before directed to be taken." Art. I, Sec. 9. Cl. 4.

The class of duties, imposts and excises, which it regards as indirect taxes, must be uniform throughout the nation. The other class, which it regards as direct taxes, must be apportioned among the several States in proportion to their representation in the popular branch of Congress; which representation is based upon population, as ascertained by the census.

These two measures of taxation are radically variant in their application to the individual taxpayer, in respect of the amount required of him, so that Congress in imposing a tax has no option as to which of the two measures shall be applied to it. To whichsoever of the two classes the tax belongs, the measure prescribed for that class must be followed in order for the tax to be valid, and no one tax can possibly be made to fit both measures.

It appears that the notion has come to exist among many that Congress is the first, last and final judge in matters of taxation, and that admitted injustice, or any tyranny exercised by Congress on this subject could be redressed only by the people acting in their political character. This idea has grown from the very small beginning of a tax laid on carriages by the Act of Congress of 1794, which the Supreme Court of that time thought, with great doubt and hesitation, was not a direct tax within the meaning of the Constitution. That lav made no provision for taxing Incomes. And so the effect of the decision was thought to be that if a tax on carriages was not a direct tax, a tax upon anything else excepting what, without any stated reason for the difference, some members of Congress and of the Court of that time thought was the only subject of direct taxation, viz., land and polls, was not a direct tax. The decision referred to was made in 1796.

After a lapse of nearly seventy-five years (the

carriage tax having been soon repealed) cases arose under the war impositions of Congress, enacted in 1861 and the years following. A General Tax on Incomes had never been imposed by Congress until the War of Northern Aggression, when a tax of twenty millions of dollars in the whole was laid upon the several States according to population, to be collected out of land alone; but with the provision that the States might assume the payment of the tax, and collect it in their own way. The same Act of Congress imposed a tax on a great variety of occupations under the heads of licenses, trades, transportation, etc., and, for the first time in the history of the Government, upon personal incomes. During the whole seventy years and upwards after the Constitution was adopted no question did or could arise in respect of the constitutional character of a Genera] Tax on Incomes. The only action of Congress that could possibly affect the question was the Act of 1794, before mentioned, taxing carriages, which tax was upheld as not a direct tax. with much doubt and hesitation.

The acts of 1861, and subsequent war-time acts, did, for the first time, undertake to impose a tax on personal incomes, as falling within the category of "duties, imposts and excises," which the Constitution authorized Congress to lay without regard to the population and representation of the States, provided only that they should be "uniform throughout the United States." The Constitution also provided that "representation and direct taxes shall be apportioned among the several States... according to their respective numbers," adding to the free persons, three-fifths of all other persons excepting Indians, -meaning, of course, the slaves. And the Constitution also provided that "no capitation or other direct tax shall be laid unless in proportion to the census." These acts of 1861, and the following ones of the war-time were upheld by the Supreme Court in Springer v. United States, 102 U.S. 586 (1880) (there are other cases, however, they can fairly be distinguished, as we

shall provide later in this work), as justifying a tax on personal incomes, not apportioned among the States, according to population. The law under which the Springer case arose was soon repealed, and no income-tax was again attempted until 1894.

There had been no personal income tax in the whole constitutional history of the United States for the seventy years of its experience of the urgent needs of more revenue, both in times of peace and Mar. The Supreme Court, in the Pollock v. Farmers Loan & Trust. 157 U.S. 429 (1894), reh. 158 U.S. 429 (1895). held that taxes imposed by Congress upon personal incomes or other property as such, were direct taxes, and, if imposed at all, must be imposed upon the people of the States according to their respective populations. Ex-Senator George Franklin Edmunds, of Vermont, elected to the United States Senate in 1866, serving successive terms until his resignation in 1891, was one of the foremost authorities on constitutional law, and as counsel for the appellants in the Pollock case, stated:

"It is curious and interesting to note that in the very learned, ingenious and exhaustive brief of the Attorney-General of the United States (than whom there is no better lawyer in the country) defending the law, there are only two or three pages of the whole ninety-nine devoted to suggesting, even, that the true meaning (were the matter res nova) of the Constitution could warrant the imposition of a personal income-tax otherwise than by apportionment among the States according to population as provided in the Constitution." The Forum. Salutary Results Of The Income-Tax Decision. July, 1895, p. 515.

To the Founding Fathers, the primary purpose of apportionment was to block the central government from using the power of direct taxation -- except in times of

great national emergency. The barrier was not in the formula of distributing the tax load among the states, but in the procedure for doing so. To lay a direct tax, Congress had to do certain things that no government wants to do. Since each tax is a separate project, each must be written into a revenue act. The purpose and the amount of the tax must be clearly stated. It then must be debated and voted upon. When the tax is collected, the revenue act expires, and the door to more money is closed. How different this is from the ongoing power of general taxation, under which the purpose is seldom known, the amount is always in doubt, and the process is endless. The rule of apportionment, therefore, was the greatest restraint on the power and reach of government that had yet been devised by man, and it is little wonder that it became a thorn in the side of federal politicians in the years to follow.

The builders of the political and social state composing the Union evidently intended and endeavored to make the principles and practice of taxation plain. There could have been no purpose of equivocation or concealment. There was none. The danger and the injustice of allowing the force of mere numbers to impose taxes which they should not bear themselves in due proportion, by any scheme that might be invented, upon the minority of the people of the States were perfectly understood. And so the relative equality of representation and taxation as such - just as it then was in many and still is in several States - was distinctly and emphatically provided for in the Constitution, - affirmatively by the provision that "representation and direct taxes shall be apportioned among the several States which may be included in this Union according to their respective numbers," and negatively, by the prohibition that "no capitation or other direct tax shall be laid unless in proportion to the census." Those great architects and builders of government well knew - better, perhaps, than we do in these days of much apparent, and some real sympathy with

doctrines and practices destructive of liberty and social order when the point "where virtue stops and vice begins"

has become obscure - that the rule of taxation should not and could not safely be left to the unlimited caprice, prejudice or selfishness of mere majorities represented in Congress.

An active and progressive people must have money for the common purposes of administration, - "to provide for the common defence and general welfare of the United States," as the Constitution so happily puts it. To this end, in addition to the provision for direct taxation as before stated, the Constitution provided that Congress should have "power to lay and collect taxes, duties, imposts and excises, ...but all duties, imposts and excises shall be uniform throughout the United States." Thus, the whole scheme for raising money by taxation was complete. On the one hand, taxes that bore directly upon the citizens must be apportioned among the States according to population, and on the other hand taxes in the form of "duties, imposts and excises," that would bear upon citizens only in proportion and according to the occupations and transactions they might choose to engage in, might be laid upon all equally and everywhere. The patriotic men who established this great government knew that unrestrained and unregulated taxation had been, in all the experiences of the world, the chief instrument of tyranny, and that while it was indispensable to the existence of the nation, it was not the less necessary that it should be kept within definite bounds.

The United States Government has the whole range of voluntary social and business activities left open for taxation, and the whole property of the country, real, personal and mixed, is left subject to taxation by the just and safe rule originally declared, according to representation - that is, by taxation, that those who impose it are, with their own people in their several States, to share in the burden.

The Government is not the state. It is only the agent

of the state, and it must act within the limits of its authority. If it acts beyond this, it becomes a usurper, and practices tyranny. The comparison of the governmental tyranny of a single despot, or even of a small body of persons, with the tyranny of the majority of a people, unhappily shows that the tyranny of the mob or commune, or any other tyranny of mere numbers, is far worse than any other while it continues.

If this assumption and reasoning may seem, to anyone, extravagant and unwarranted, his attention is respectfully asked to the following expression of opinion on this subject by the United States Supreme Court, as given through Justice Miller in the celebrated case of Loan Association v. Topeka. 20 Wall. 655 (18774) at page 662:

"It must be conceded that there are rights in every free government beyond the control of the State. A government which recognised no such rights, which held the lives, the liberty, and the property of its citizens subject at all times to the absolute disposition and unbounded control of even the most democratic depository of power, is after all but a despotism. It is true it is a despotism of the many - of the majority, if you choose to call it so - but it is none the less a despotism." [Emphasis added]

The unbridled power of the federal Government to impose taxation upon a citizen's property or income, within the several States, as an indirect tax, thereby transferring their wealth, for whatever the majority in Congress deems to be for the "general welfare," is the single most destructive form of tyranny this nation has ever known.

It has been decided by the highest authority, the United States Supreme Court, in the Brushaber case, previously cited, that the Sixteenth Amendment cannot relieve a direct tax from the regulation of apportionment. Circuit Court cases, many of which are cited above, have held that a General Tax on Income is a direct tax. The

Brushaber case has not been overruled, therefore, it is controlling. The burden is to demonstrate that a General Tax on Income is a "direct tax".

In one sense, all or almost all taxes are direct, i.e., there is an obligation directly imposed upon some one to pay them to the official appointed to receive them. The merchant who imports goods from abroad is directly compelled to pay the duty or impost upon them, to the Collector of Customs at the port. The manufacturer or producer of articles subjected by law to an excise tax is obliged directly to pay such tax to the Collector of Internal Revenue in his district; and such, we think will, upon examination, be found to be the practical status, through nearly the whole range of the duties, imposts and excises, referred to by the Constitution, and which, indisputably, it classifies as indirect taxes.

It cannot be disputed, that at the time of the adoption of the Constitution, and for a long time previously, there was an understanding, substantially universal, in this country, in England, and in other parts of Europe, that taxes were appropriately divisible into two great classes, direct and indirect, and that in discussions upon the subject of taxation, by political economists and others, taxes were accustomed to be spoken of and thus classified.

It is likewise indisputable that in such discussion, taxes upon consumable commodities, or what are called taxes upon consumption, have always been treated and reckoned as falling within the class of indirect taxes, and upon examination of the reasons assigned by writers upon the subject for thus denominating them, it will be found that they are substantially confined to these two reasons, viz.:

1. That usually the persons who primarily pay such taxes do not bear the burden of them, but shift it upon someone else, and that all such taxes, of whatsoever kind, imposed upon the commodity, the processes or manufactures in respect of it, down to the time of its reaching the consumer, enter into the price which he has to pay for the

article, and are thus indirectly paid by him, although he may never directly pay to the tax gatherer any sum whatever in respect of the thing taxed.

2. That in respect of all such taxes upon consumable commodities, the Government exercises no compulsion upon the consumer upon whom the burden of the tax ultimately falls, but that if, or when, he bears the burden, in the shape of enhanced price of the article which he buys and consumes, his subjection to it arises from his own choice or free will, which he exercises in the one way or the other according to his own estimate of what he can or cannot afford to buy or consume, or from such other considerations as he allows to influence him.

In The Theory And Practice Of Taxation, by David Ames Wells, L.L.D.. D.C.L., 1907, p. 549, he said:

"But any doubt on this subject ought no longer to be tolerated, for we now have, almost for the first time, a definition of or distinction between direct and indirect taxes that is founded on sound philosophy and large experience, and can not be refuted - namely, a direct tax has always in it an element of compulsion. The person against whom or on whose property or income a direct tax is levied has no option whether or when he shall pay. There is nothing voluntary about it. On the other hand, an indirect tax, whoever may first advance it, is paid voluntarily, and primarily by the consumer of the taxed article. [Emphasis added]

Constitutional Convention Not a Legislative Body

Reference to the minutes of the debates in the Convention of 1787, which framed the Constitution, as now

found in the Madison papers, so-called, does not appear to afford much, if any, new light, of substantial importance, upon the question under discussion. But in any case, those debates could not be referred to with any substantial effect, because - -

1. That Convention was not at all a legislative body. After devising the proposed Constitution, it merely submitted it to the consideration of the old Congress, with a recommendation, in substance, that thereafter it should be submitted for assent and ratification, to a convention of delegates in each State, chosen under recommendation of its legislature, and that when thus ratified by nine States, proceedings should be had for putting it in operation. The life and efficacy of the Constitution was derived entirely from the action of the States in approving and ratifying it. The Convention which devised or framed it, had not, and did not claim to have, any power to give it vitality.

2. The Convention which devised the Constitution sat with closed doors, a pledge of secrecy was laid on each member, and thus their debates and inside proceedings remained secret until the lapse of many years after the Constitution had been ratified and had gone into effect. Thus the States which had to determine, each for itself, the question of assent and ratification, having before them merely an instrument which had been devised and was submitted to them, could not have been influenced by anything which had occurred in the debates which were at that time shrouded in secrecy.

The history of this matter will be found in McMaster's History of the People of the United States, Vol. 1, p. 418, with an extract as follows:

"The credentials of the delegates were then examined, a committee appointed to prepare rules and an adjournment to the twenty-eighth (May, 1787), taken. *** When Monday, the twenty-eighth (the adjourned day above mentioned) came, nine States

were present, the doors were closed, a pledge of secrecy laid on each member, and from that day forth, what took place in the Convention was never fully known till Madison had been many months in his grave."

And on the same page is the following note:

"Madison's Debates form the only complete record of the discussions in the convention that has come down to us. Judge Yates did indeed take notes which were published after his death. But Yates, with Lansing, lost his temper, quit the Convention in a huff, early in July and never returned. His notes, therefore, cover but a third of the time the Convention sat, and are moreover hasty and crude. Yates was a rank partisan, represented the Clinton party, and when he found he could not carry his point, withdrew. His notes are of doubtful fairness. Madison's Debates were carefully prepared and after his death published by Congress."

Madison died in 1836. Yates, here mentioned, was Robert Yates, afterwards Chief Justice of the Supreme Court of New York. He retired from office by reason of having reached the then constitutional limit of age for judicial service, and died in 1801.

Upon the above mentioned basis of ascertaining the intent as clearly and certainly as may be, let's proceed to discuss the question, what taxes are "direct taxes" within the meaning of the Constitution, so far as is material for determining that a General Tax on Income 1s a direct tax.

The Constitution is to be interpreted by gathering the meaning and Intention of the Convention which framed and proposed it for the adoption and ratification of the Conventions of the people of and in the several States. At the date of the Constitution (1787), the words "direct

taxes" and "indirect taxes" were household words. They were borrowed from the literature and practice of Great Britain and the Continent of Europe. They are to be found in the literature of the period, and in the debates of both Federal and State Conventions. They had been used in Europe as meaning taxes which fell directly upon property and its owner, like a land tax or a tax on incomes, and as meaning taxes of which the ultimate incidence might fall upon another than the one who originally paid them, like taxes upon consumption. The inquiry, therefore, now is whether, when adopted in this country, they carried with them the signification which universally obtained elsewhere, or whether they were accepted with a limited and restricted signification, which confined the meaning of the words to taxes on land and capitation taxes.

There is no persuasive evidence that the American people, in using the words "direct taxes," intended that an income tax should not be included therein. The phrase "income tax" is not to be found in the debates of the Philadelphia Convention, nor, in that precise form, in the debates of the conventions of the several States which adopted the Federal Constitution. But that silence throws no light upon the inquiry whether at that time an income tax was not included in the phrases "direct tax" or "direct taxes" by the American citizens who were then paying such taxes.

A land tax is not mentioned in the Constitution, and, therefore, it is not specified in that instrument as being either a direct or an indirect tax.

The phrase "direct taxes," to find its fulfillment, must of necessity include something more than a capitation or poll tax, which is otherwise provided for, and apply to something other than a single tax, that is, a tax on lands; otherwise the demand of the plural, "taxes," is not fulfilled.

There is no persuasive evidence that in 1787 the species of tax then embraced within the phrase "direct tax" in other countries and in the original States was

intentionally excluded by the framers of the Federal Constitution, and by the citizens of the States which adopted it. History does not warrant the averment that such exclusion was made.

What did the people of the ratifying States understand by the phrases "direct tax" and "direct taxes?" Previous to the adoption of the Constitution there were no Federal taxes, and all precedents for helping to a correct determination of the constitutional meaning of direct taxation must therefore be drawn from the prior experience of the several States. Both the derivative definition and the practical definition afforded by the practice of the States included a tax on income.

Historical research shows that Massachusetts had taxed incomes for more than a hundred years prior to the assembling of the Constitutional Convention; other of the leading States were imposing like taxes at or about 1787, and the receipts therefrom were used to help pay the quotas demanded by the then Government of the Confederation for the maintenance of the Federal Government. The income tax so paid, and all the other internal taxes collected by the States, were known and collected as direct taxes and are so called today.

George Ticknor Curtis, American lawyer, legal writer and constitutional historian, appeared before the United States Supreme Court in many landmark cases, including the Dred Scott case, and the legal tender cases. He wrote an article which was published in Harper's New Monthly Magazine (1866), Revenue Powers of the United States. Vol. XXXIII, pp. 360-361. He stated that the people used terms in the Constitution which were understood by common usage as follows:


"By principle, as used in this connection, I mean no reference to theoretical ideas of how the taxing

power of a Government should be arranged; but I include all that reference to terms used, to the known character and purposes of the Government actually established, and to the circumstances on which the Constitution was to operate, that enters into a second canon of interpretation. With respect, then, to the terms employed to describe the subjects of the revenue powers, we shall find very little profit in resorting to the aid of lexicographers, contemporaneous or subsequent. The Constitution was not made to be ratified by a people Mho would be likely to look into dictionaries for the meaning and scope of the terms in which it was expressed. It was a great instrument of fundamental legislation; and the safest rule for its interpretation is to regard the enacting power - the PEOPLE - as using terms in the sense in which they had been accustomed to use them, if they were borrowed from surrounding legislation, or in the sense which the surrounding circumstances show to have been that in which they must have used them for the purpose which they meant to accomplish. This is especially true of the terms which describe the powers conferred upon Congress. Take, for example, the term 'Commerce,' which Congress was to have the power to 'regulate,' as between the State and foreign nations, and among the States. One might look into forty dictionaries, without finding that meaning of the term 'Commerce' which we know from the surrounding circumstances and the historical purpose was intended to be given to this subject of legislative power, and without finding that scope of the term 'regulate' which we know from the same sources was intended to be given to this legislative authority. In the same way, if we would know the meaning in which the people of the United States used the terms 'Taxes, Duties, Imposts, and Excises.' we must go to the sense in which they were

accustomed to use these terms for purposes corresponding to those for which they must have used them in this Constitution; and in this inquiry lexicons, however good, will help us very little, and the definitions of economists as little.

"I assume, then, that when the people of the United States used the terms 'Taxes, Duties, Imposts, and Excises,' they used these terms as they had been accustomed to use them; that they described by them the branches of revenue power which they meant to confer on Congress, in order to enable it to pay the debts and provide for the general welfare of the United States under the Constitution; and that they could have understood no other way of doing this, but to confer on Congress the same kinds of power which their State governments exercised in paying the debts and providing for the general welfare of the States under their local Constitutions. *** It is historically notorious that the people of the States were told that Congress must have the same sources of revenue which the States had hitherto enjoyed; that as to some of these sources the Federal power must be exclusive, that as to all the others it must be concurrent; and that the sole compensations or safeguards that could be given for this vast surrender were to consist in two restraining rules, by which Congress were to be bound in their revenue legislation. As the revenue powers of Congress, therefore, were to be the same as those previously held and exercised by the States, subject to the two restraining rules, it is a just and reasonable inference that the terms of the grant described the subjects of the powers as the people of the States had been accustomed to describe them in their own governments. In that usage the term 'Taxes' had undoubtedly embraced those exactions for public use which the State governments had always assessed upon the citizen.

either in respect of his person or of his property

without any reference to his consumption or diminution or expenditure of the fund from which the assessment was drawn; and the terms Duties, Imposts, and Excises, described those impositions for public use; which they had been accustomed to lay on articles of consumption, and by the operation of which the public takes, and means to take to itself, a part of that which is being consumed. Any one who will look into the legislation and habits of the States, prior to the Federal Constitution, will see that these terms were used in these senses; and that 'Taxes' was not understood to include 'Duties, Imposts, and Excises,' although in a lexigraphical or general sense all public assessments, demanded under authority of law, are Taxes." [Emphasis added]

The powers expressly delegated to the Federal Government were the same kinds of power which the State governments exercised at the time. The direct tax clauses of the Constitution were based upon what the States considered to be direct taxes. This was the only way the people of the respective States could have understood and used the terms "Taxes, Duties, Imposts and Excises."

Chapter III



The pertinent literature of the pre-Constitutional period showed that the then American citizens were quite familiar with the relevant English laws and with the writings of political economists. Additionally, they borrowed the phrases "direct tax" and "direct taxes" from the language of the books of the period, and applied them to such taxes as they were then paying in their respective States, both for the support of such States and for the support of the general government under the Articles of Confederation. The Constitutions of the States adopted prior to 1787 indicate that there had been income tax laws passed, by those States, as colonies, for the purpose of assessing and collecting taxes upon incomes, and it was provided that such laws should be carried forward under their new constitutions.

The Beginnings

The first general tax law in the American colonies, with the exception of the early poll-tax in Virginia, was the law of 1634 in Massachusetts Bay. Colonial Records of Massachusetts Bay (Shurtleff's ed., 1853), I, 120. This provided for the assessment of each man "according to his estate and with consideration of all other his abilityes whatsoever." It is probable that the measure of this ability was to be found in property; for, although the law itself does not further explain the term, the matter is elucidated in a provision of the next year, that "all men shall be rated for their whole abilitie, wheresoever it lies." Colonial Records of Massachusetts Bay, I, 166. This seems to imply only visible property; for such property alone is susceptible of a situs.

It was not until several years later that "ability" was defined to include something more than mere property. This, however, occurred not in Massachusetts Bay, but in the colony of New Plymouth. In 1643 assessors were appointed to rate all the inhabitants of that colony "according to their estates or faculties, that is, according to goods, lands, improoued faculties and personall abillities." Records of the Colony of New Plymouth: Laws 1623-1682 (Pulsifer's ed.), XI, 42. The court order of 1646 provided not only for the assessment of personal and real estates, but distinctly mentioned "laborers, artificers and handicraftsmen" as subject to taxation, and then went on and said:

"And for all such persons as by advantage of their arts and trades are more enabled to help bear the public charges than the common laborers and workmen, as butchers, bakers, brewers, victuallers, smiths, carpenters, taylors, shoemakers, joyners, barbers, millers and masons, with all other manual persons

and artists, such are to be rated for returns and gains, proportionable unto other men for the produce of their estates." Colonial Records of Massachusetts Bay. II, 173.

Here for the first time we have the definition of faculty or ability. Just as the faculty of the property owner is seen in the produce of his estate, so that of "artists" and "tradesmen" is to be found in their "returns and gains." Of course, since the property value of an estate is approximately equal to the capitalized value of the annual produce, the faculty of the property owner can be measured by the value of the property, that is, by the value of his "estate"; but when there is no property, the assessors are compelled to fall back on the "returns and gains."

The principle thus laid down in the records of Massachusetts Bay was soon adopted by other colonies. The colony of New Haven, for instance, at first levied a land tax. But as early as 1640 personal property was assessed, by the provision that a new rate should be "estreeted, halfe upon estates, halfe upon lands." Records of the Colony and Plantation of New Haven. I, 40. In 1645 it was seen that even this was not adequate, and a proposal was made to tax others besides property owners; but no decision was reached at that time. Ibid., I, 181. As the dissatisfaction grew, a committee was appointed in 1648 to inquire into the feasibility of the Massachusetts system of taxing all property in general, and also of levying a tax on the profits of those who possessed no property. Ibid., I, 448. The committee reported that they were in doubt as to the advisability of taxing houses and personal property, but that "for tradesmen they thinke something should be done that may be equall in waye of rateing them for their trades." Ibid., I. 494. As a result the law of 1649 was enacted, which introduced the taxation of profits of laborers, tradespeople and others.

In Connecticut the early laws were patterned on the

Massachusetts Bay legislation. It was provided in 1650 that "every inhabitant who doth not voluntarily contribute proportionably to his abillity to all common charges shall be compelled thereunto by assessments and distress"; and it was further provided that the lands and estates should be rated "where the lands & estates shall lye." but "theire persons where they dwell." Colonial Records of Connecticut, I. 548.

In Plymouth Colony the practice inaugurated by the law of 1643 continued, although we find only two more instances where it is expressly mentioned, namely, in 1665, when "visible estates and faculties" were mentioned, (Records of the Colony of New Plymouth (Pulsifer's ed.), XI, 211), and in 1689, when a court order fixed the valuation for different kinds of visible estate, but left the valuation of "faculties and personall abillities" to be determined "at will and doome." Ibid., VI. 221.

In Rhode Island the faculty tax was introduced a little later. In 1673 the assembly laid down the rule that taxes ought to be assessed according to "equety in estate and strength," i.e., not only according to the property, but also in proportion to what was elsewhere called the "faculty," or "profits and gains." Colonial Records of Rhode Island, II. 510.

Outside of New England this early taxation of profits along with the general property tax was found also in New Jersey, where it was provided by the law of 1684 that not only property owners, but also:

"[A]11 other persons within this province who are free men and are artificers or follow any trade or merchandizing, and also all innholders, ordinary keepers and other persons in places of profit within this province, shall be lyable to be assessed for the same according to the discretion of the assessors." Laws of New Jersey, 1664-1701 (Leaming and Spicer), 494.

This completes the list of examples of the faculty tax during the seventeenth century. Later on, it will be seen that, the tax appeared in some of the Southern states. In New York it never secured a foothold. During the Dutch domination, the tax system of this latter colony was composed almost entirely of excises and duties; when the English obtained control, the general property tax was introduced, but without any additional "faculty" tax as in the New England colonies.

These "faculty" taxes were also known as "capitation" taxes which were expressly made "direct taxes" in the Constitution.

The Eighteenth Century

During the eighteenth century the custom of assessing profits continued and extended to other colonies. In Massachusetts more earnest and repeated efforts to explain and enforce the law were made than anywhere else.

Upon the union of the Plymouth and Massachusetts Bay colonies into the Province of Massachusetts, under the charter of 1692, a law was immediately enacted providing that all estates whatsoever, real and personal, should be taxed at "a quarter part of one year's value or income thereof." Acts and Resolves of the Province of Massachusetts Bay. 1692 to 1780 (5 vols.), I, 29. 92.

In 1706, the assessors were admonished to rate:

"[I]ncome by any trade or faculty, which any person or persons (except as before excepted) do or shall exercise in gaining by money, or other estate not particularly otherwise assest, or commissions of profit in their improvement, according to their understanding and cunning, at one penny on the pound, and to abate or multiply the same, if need

be, so as to make up the sum hereby set and ordered for such town or district to pay. Ibid., I, 592. [Emphasis added]

The law of 1738 added the words "business or employment," commanding the assessment of:

"[T]he income or profit which any person or persons (except as before excepted) do or shall receive from any trade, faculty, business or employment whatsoever, and all profits which may or shall arise by money or other estate not particularly otherwise assessed, or commissions of profit in their improvement. ..." Ibid., II, 934.

Except as to the rates, this form of law continued unchanged till 1777. The law enacted in that year gave a fuller interpretation of income than any previously. Taxpayers were assessed:

"[0]n the amount of their income from any profession, faculty, handicraft, trade or employment; and also on the amount of all incomes and profits gained by trading by sea and on shore, and by means of advantages arising from the war and the necessities of the community." Ibid., V, 756. [Emphasis added]

Again, the law of 1779 provided that:

"[I]n considering the incomes and profits last mentioned, the assessors are to have special regard to the way and manner in which the same have been made, as well as the quantum thereof, and to assess them at such rate, as they on their oaths shall judge to be just and reasonable; provided, they do not in any case assess such incomes and profits at more than five times [increased in the next year to

"ten times"] the sum of the same amount in other kind of estate." Ibid., V. 1110. 1163. [Emphasis added]

In 1780, a constitution was adopted which commanded, among other things, that the public charges of government should be assessed "on polls and estates in the manner that has hitherto been practiced." The same methods, therefore, continued to the end of the century.

In none of the other colonies is there found so full or so frequent indications of the legislative intent as in Massachusetts. But occasional references are found to the practice of assessing income. And although it is probable that the custom was gradually dying out, the storm and stress of the Revolutionary period brought it again to the front in several places.

In Connecticut the early laws followed almost word for word the Massachusetts legislation. Later acts provided that:

"[A]11 such persons who by their acts and trades are advantaged shall be rated in the list proportionable to their gains and returns, -butchers, bakers ... and all other artists and tradesmen and shopkeepers." Acts and Laws of Connecticut (New London, 1715), 100. [Emphasis added]

The tax continued in Connecticut to the close of the century substantially unchanged, with the exception that ordinary artisans were subsequently exempted.

In New Hampshire, the first detailed assessment law passed in the province, in 1719, instructed the selectmen to assess the residents "in just and equal proportion, each particular person according to his known ability and estate." Later on. in 1739, "an act for the more easy and speedy assessing" of taxes was passed, which authorized the selectmen to assess "the polls and estates of

inhabitants, each one according to his known ability." Acts and Laws of his Majesty's Province of New Hampshire (1761). 30. 180.

Vermont, when it separated from New York, followed the example of Connecticut in taxation as in much other legislation. The first law on the subject, that of 1778, was very explicit in its provisions, and repeated the Connecticut law in some places word for word. The part of interest was as follows:

"Be it further enacted by the authority aforesaid, that all allowed attorneys at law in this commonwealth, shall be set in the annual list for their faculty. - the least practitioner fifty pounds, and the others in proportion according to their practice; to be assessed at the discretion of the listers of the respective towns where said attorneys live during their practice as such. All tradesmen, traders, artificers, shall be rated in the lists proportionable to their gains and returns; in like manner, all warehouses, shops, workhouses and mills where the owners have particular improvement or advantage thereof, according to the best judgment and discretion of the listers." Hood, History of Taxation in Vermont. 32 and 36. [Emphasis added]

Wood, in his History of Taxation in Vermont, when speaking of these laws, said (p. 39): "It will be observed that the income idea was thus enlarged to suit the growing and diversifying business of the community." Hood also referred to a law passed in 1825, of which he said (p. 46): "The change in practice as to incomes consisted in the revival of minimum assessments."

In Pennsylvania, 1782, a law was enacted which imposed a poll tax on all freemen. But the law went on to say that:

"[A]ll offices and posts of profit. trades, occupations and professions (that of ministers of

the gospel of all denominations and schoolmasters only excepted) shall be rated at the discretion of the township, ward or district assessors, and two assistant freeholders of the proper township, ward or district, having due regard to the profits arising from them." Laws of the Commonwealth of Pennsylvania (Dallas), II. 8.

In 1785 mechanics and manufacturers were added to the list of exempted classes. The discretion which this act left to the assessors was very slight, as the lower and higher limits of the tax were definitely fixed.

Maryland, when the State constitution was adopted in 1777, made provision for an assessment of one-quarter of one per cent on the "amount received yearly" by "every person having any public office of profit, or an annuity or stipend," and on the "clear yearly profit" of "every person practising law or physic, every hired clerk acting without commission, every factor, agent or manager trading or using commerce in this state." Maryland, Laws of 1777, ch. 22, secs. 5, 6.

In South Carolina, 1703, a law provided that individuals should be assessed on their "estates, goods, merchandizes, stocks, abilities, offices and places of profits of whatever kind or nature soever." The law of 1777, which was the first under the State constitution, phrased it a little differently by providing for a tax on "the profits of all faculties and professions, the clergy excepted, factorage, employments, handicrafts and trades throughout this state." Cooper, Statutes at Large of South Carolina. II, 36. 183; IV, 366.

This statute came up for consideration in the case of Savannah v. Hartridge, 8 Ga. — ( ). at page 23, in which the Court said:

"Income is taxable property by the general tax law of that State, and had been, if we mistake not, from the first act upon the subject in 1777. down to

1783, when the charter to the City of Charleston was passed."

In addition to these cases of the taxation of profits as such, there were many cases in which, while the tax was imposed on property, the assessment was made on the basis of product. That is, it was deemed easier to ascertain the profits than the value of property: the property was gauged by the revenue. Thus in Massachusetts in 1692 all estates real and personal were to be rated "at a quarter part of one year's value or income thereof." To make this clearer, it was provided in the following year that "all houses, warehouses, tanyards, orchards, pastures, meadows and lands, mills, cranes and wharffs be estimated at seven years' income as they are or may be let for; which seven years' income is to be esteemed and reputed the value of craftman, for his income." From this time on until the Revolutionary period the valuation of real estate was computed on the income derived from it, but the number of years varied. From 1698 to 1700 the valuation was one year's income, but during most of the eighteenth century it was six years' income. Acts and Resolves of the Province of Massachusetts Bay. I, 29, 92, 413.

We have traced the tax laws of Massachusetts to the law of 1777, which was virtually continued by the new constitution of 1780, and we saw the gradual process by which the term "faculty tax" was displaced both in popular usage and in legal parlance by "income tax." [It must be noted that a "capitation tax" was expressly recognized as a "direct tax" in the Constitution. An income tax differs only in respect to the assessment. One is assessed upon the supposed income (Faculty Tax), or the rank; the other upon the real income (a General Tax on Income). Smith's Wealth of Nations, Vol. 3, pp. 276-278.] No change was made in the wording of the provisions until 1821, when an act was passed which included among the sums to be returned to the assessor:

"[T]he amount of the income of such inhabitants from any profession, handicraft, trade or employment, or gained by trading at sea or on land, and also all other property of the several kinds returned in the last valuation, or liable to taxation by any law. General Laws of Massachusetts, 1831, (3 vols.). vol. ii, laws of 1821, chap. 107, sec. 2. [Emphasis added]

This wording is repeated in the act of 1830, but in this act the term faculty is omitted; and it never reappears in later legislation. In the revised statutes of 1836 another change was made through the omission of the word "handicraft." The section read as follows:

"Personal property shall, for the purpose of taxation, be construed to include ... income from any profession, trade or employment, or from an annuity, unless the capital of such annuity shall be taxed in this state." Revised Statutes of Mass., 1836. chap. 7, sec. 4. [Emphasis added]

A special commission on taxation in Connecticut, referring to the law of 1769, spoke of "our ancient system of incomes taxes." Connecticut Session Laws of 1819, 338.

The law of Pennsylvania passed in 1782 so illustrates the point of the sustainment of the Federal government by a tax to be paid by State citizens occupying offices and posts of profit, trades, occupations and professions, that it is worthy of quotation in full. It is as follows:

"PENNSYLVANIA: An act to raise effective supplies for the year 1782.

SECT. I. - Whereas, the United States of America in Congress assembled, have by their resolution of the thirtieth of October, demanded of the several States in union such effective supplies as may enable them to carry on the war with vigor and effect, and

improve our late success into a full establishment of independence and peace:

And whereas it is the desire of the representatives of the freemen of this State to comply with the said resolutions.

SECT. II. - Therefore, be it enacted, and it is hereby enacted by the Representatives of the freemen of the Commonwealth of Pennsylvania, in General Assembly met, and by the authority of the same, that the sum of 420,297 pounds and 15 shillings, being the quota required of the State, be raised, collected and paid, for the year 1782 in four equal payments.

SECT. III. - And be it further enacted by the authority aforesaid that every single freeman, who at the time of assessing any tax imposed by this act, is or shall be of the age of 21 years or upwards, and has been out of his apprenticeship nine months, shall pay a sum not exceeding six pounds nor under three pounds. And that all offices and posts of profit, trades, occupations and professions (that of ministers of the gospel of all denominations and schoolmasters only excepted) shall be rated at the discretion of the township, ward or district assessors, and two assistant freeholders of the proper township, ward or district, having due regard to the profits arising from them. Passed March 27, 1782. 2 Dallas' Digest, p. 8."

In Delaware, and as Secretary Wolcott said in his Report:

"Taxes have been hitherto collected on the estimated annual income of the inhabitants of the State, without reference to specific objects. It appears to have been a rule established by the assessors, and confirmed by long usage, to assess all persons at one-fifth part of their annual

income." [Emphasis added]

Therefore, we have, prior to the adoption of the Constitution, the States of Vermont, Massachusetts, Connecticut, Pennsylvania, Delaware, New Jersey, Virginia and South Carolina, assessing their citizens upon their profits from their professions, trades and employments, and collecting a tax thereon for the benefit of the states and of the general government. This collection of historical matter shows that at all times, both before and since the adoption of the Constitution, a tax upon incomes has been recognized, designated and described as a direct tax.

In addition to these taxes upon income, nearly all the States imposed poll taxes, taxes on lands, on cattle of all kinds, and various kinds of personal property.

How were all these taxes known to the people of the States at the time when they were paying them? The Century Dictionary says:

"In the United States, all state and municipal taxes are direct, and are levied upon the assessed valuations of real and personal property."

Cooley and the American Cyclopaedia also assert that all states taxes are direct taxes. "Taxes are usually divided into direct and indirect; the former include assessments made upon the real and personal estate of the taxpayer upon his income or upon his head. New Am. Cyclop.

Dr. Lieber, referring to the different modes of levying taxes, said:

"The first way is to direct; to determine from the statement of the parties concerned, or from official information, the net income of persons. This kind of tax is called direct. 7 Encyclopedia Americana, p. 155. [Emphasis added]

But there is more persuasive evidence as to what kind of taxes the people at the time called those which they were paying in the states for the joint support of the states and of the general government. In the Massachusetts' Convention, Mr. Dawes said:

"Congress had it not in their power to draw a revenue from commerce, and therefore multiplied their requisitions on the States. Massachusetts, willing to pay her part, made her own trade law, on which the trade departed to such of our neighbors as made no such impositions on commerce; thus we lost what little revenue we had, and our only course was, to a direct taxation". 2 Ell. Deb., 41. [Emphasis added]

Mr. Nicholas, in Virginia, said:

"Nine-tenths of the revenues of Great Britain and France are raised by indirect taxes; and were they raised by direct taxes, they would be exceeding oppressive. At present the reverse of this proposition holds in this country, for very little is raised by indirect taxes. The public treasuries are supplied by means of direct taxes, which are not so easy for the people." 3 Ell. Deb., 99. Emphasis added]

Mr. Iredell, of North Carolina, said:

"Our state legislature has no way of raising any considerable sums but by laying direct taxes. Other states have imports of consequence. This may afford them a considerable relief; but our State, perhaps, could not have raised its full quota by direct taxes without imposing burdens too heavy for the people to bear." 4 Ell. Deb., p. 146. [Emphasis added]

See, The genuine information delivered to the Legislature of the State of Maryland, relative to the proceedings of the General Convention held at Philadelphia in 1787, by Luther Martin, Esq., Attorney-General of Maryland, and one of the delegates in the said Convention, "from which it appears that direct taxation was 'either a capitation on their heads or an assessment on their property.'" Ibid., 1, p. 368.

Gouverneur Morris, in his observations on the Finances of the United States, said, two years after the Constitution was adopted:

"There is a concurrent jurisdiction respecting internal or direct taxes."

In his Report to Congress, in 1812, Albert Gallatin said:

"The direct taxes laid by the several states during the last years of the Revolutionary War, were generally more heavy than could be paid with convenience; but during the years 1785 to 1789, an annual direct tax of more than two hundred thousand dollars was raised in Pennsylvania, which was not oppressive, and was paid with great punctuality."

Although the framers of the Constitution and the people they represented might not fully agree as to a full and comprehensive definition of a direct tax, there was a perfect unanimity of opinion among them that an income tax was a typical example of that kind of taxation.

The only argument advanced in the past that a General Tax on Income is not a direct tax, has been that the rule of apportionment would make it difficult to levy an income tax. That difficulty, if it existed, might well be urged as a reason why an income tax cannot be constitutionally imposed. It is no ground for arguing that when the States adopted a constitutional provision covering an income tax,

the instrument did not mean what its terms plainly said.

It is entirely clear that there would be no practical difficulty in apportioning among the States, as provided by the Constitution, a General Tax on Income if Congress should so choose. In so doing the same course would be pursued in substance as under the old direct tax laws where land alone was taxed, that is to say, after fixing the gross amount to be raised, and making a mathematical apportionment of it between the States, calling in by a fixed day the returns in each State of the taxable amounts of income, and after they are all in, apportioning upon them respectively, by mathematical calculation, the amount of the quota of the State; following substantially the like course as is everyday practice in the States where there is a general assessment for taxation, of the real and personal estate subject to taxation.

The Question of Whether a General Tax on Income Is a Direct Tax Cannot Be Deemed Settled Until It Is Decided in Accordance With the Plain Meaning of the Constitution and The Dictates Of Common Sense In a Case Directly Presenting the Question

In Leloup v. Port of Mobile. 127 U.S. 640 (1888), the Supreme Court said:

"The State Court relies upon the case of Osborne v. Mobile, 16 Wall., 479, which brought up for consideration an ordinance of the city, requiring every express company, or railroad company, doing business in that city, and having a business extending beyond the limits of the State, to pay an annual license of $500. *** This Court held that the ordinance was not unconstitutional. This was in

December term, 1872. In view of the course of decisions which have been made since that time, it is very certain that such an ordinance would now be regarded as repugnant to the power conferred upon Congress to regulate commerce among the several States. A great number and variety of cases involving the commercial power of Congress have been brought to the attention of this Court during the past fifteen years which have frequently made it necessary to re-examine the whole subject with care; and the result has sometimes been that in order to give full and fair effect to the different clauses of the Constitution, the Court has felt constrained to recur to the fundamental principles stated and illustrated with so much clearness and force by Chief Justice Marshall and other members of the court in former times, and to modify in some degree certain dicta and decisions that have occasionally been made in the intervening period."

The U.S Supreme Court has supplied the rule as to how the Constitution is to be interpreted. In Martin v. Hunter's Lessee, 1 Wheat., p. 326, the Court said:

"This instrument, like every other grant, is to have a reasonable construction, according to the import of its terms; and where a power is expressly given in general terms it is not to be restrained to particular cases, unless that construction grows out of the context expressly, or by necessary implication. The words are to be taken in their natural and obvious sense, and not in a sense unreasonably restricted or enlarged."

So also in Gibbons v. Ogden. 9 Wheat. 188, the Court said:

"As men, whose intentions require no concealment, generally employ the words which most directly and

aptly express the ideas they intend to convey, the enlightened patriots who framed our constitution, and the people who adopted it, must be understood to have employed words in their natural sense, and to have intended what they have said."

Again, in Rhode Island v. Massachusetts, 12 Peters, p. 721, the Court said:

"The solution of this question must necessarily depend on the words of the Constitution; the meaning and intention of the Convention which framed and proposed it for adoption and ratification to the conventions of the people of and in the several states; together with a reference to such sources of judicial information as are resorted to by all courts in construing statutes, and to which this Court has always resorted in construing the Constitution."

Is there any persuasive evidence that the framers of the Constitution did not use the words "direct taxes" in their "natural and obvious sense"? Would there be any absurdity or injustice in holding that they did so use them, and that they intended precisely what they said? Is there any persuasive evidence that they intended to restrict the present meaning of the phrase to a more limited signification, and to reject therefrom the inclusion of a tax on income?

It would seem, from a reference to such sources of judicial information as are resorted to by the courts in construing the Constitution, that these questions must be answered in the negative.

To state it conversely and more positively, there is no evidence that either the Constitutional Convention or the assenting Convention of the several States, or the people who attended both, used the words "direct taxes" with any restricted meaning, in an unnatural sense, or that they

intelligently excluded a tax on incomes therefrom.

The Articles of Confederation

Down to the time of the adoption of the Constitution, the status was that the Congress, under the old Articles of Confederation, had no actual operative power of taxation. The necessary amount of expenditures for "the common defence and general welfare" was to be determined by the Congress, and to be contributed by the States respectively in certain specified proportions, and thereupon the Congress could call upon the States for their respective contributions or quotas, which the States were obligated to furnish accordingly; but in case of their failure or omission, there were no means of compulsion. The States could raise that contributory amount in any manner they might see fit; the Congress had no power whatever to lay any tax upon individuals. To determine the amount to be contributed the concurring vote of nine States was requisite, the voting being by States and not by the delegates individually. The States respectively had the usual plenary powers of taxation. They could tax the property of their citizens, by what are usually called direct taxes, to such extent and in such manner as they might see fit. They had unrestricted power to tax imports from abroad by imposing what are called duties or imposts, and they had also unrestricted power to impose internal revenue taxes, usually called excises, such as taxes on manufactures or other consumable commodities, and various other internal excise taxes which it is not material here to particularize.

The Congress had, for a long period, commencing in 1783, been endeavoring to obtain from the States, a grant of power to impose certain duties upon imports, but the effort, though being constantly pushed, was not

successful. This type of tax seems to have been commonly called "the impost." For an historical account in relation to it, see McMaster's History of the People of the United States. Vol. 1, pp. 141 to 145. 154. 156, 201, 202. 266-7, 357. 367. & 370.

On the 12th of July, 1777, a draft of the Articles of Confederation was submitted to Congress. Article II provided as follows:

"All charges of war and all other expenses which shall be incurred for the common defence or general welfare, and allowed by the United States assembled, shall be defrayed out of a common treasury, which shall be supplied by the several colonies in proportion to the number of inhabitants of every age, sex and quality, except Indians not paying taxes, in each colony." 1 Ell. Deb., p. 70.

Mr. Chase:

"[M]oved that the quotas should be fixed. *** by the number of the white inhabitants. He admitted that taxation should be always in proportion to property. *** He considered the number of inhabitants as a tolerably good criterion of property, and that this might always be obtained." Ibid., pp. 70-71.

Mr. John Adams said:

"It is the number of laborers which produces the surplus for taxation; and numbers. therefore, indiscriminately, are the fair index to wealth." Ibid., p. 72.

Mr. Payne:

"[U]rged the original resolution of Congress, to proportion the quotas of the States to the number of

souls" Ibid., p. 73.

It is evident, therefore, that at this early day population was taken as the fair criterion or index of wealth.

By the provisions of these Articles the colonies were required to defray the expenses of the Confederated States, and Congress was denied the power to levy taxes for its needs directly upon the States, their property or their inhabitants. This gave rise to an earnest and prolonged debate, which was not closed until after the rejection by Congress of the amendments proposed to the Constitution by Massachusetts, South Carolina, New Hampshire, New York, and Rhode Island.

These Articles of Confederation also provided that:

"All charges of war, and all other expenses that shall be incurred for the common defense or general welfare, and allowed by the United States in Congress assembled, shall be defrayed out of a common treasury, which shall be supplied by the several States, in proportion to the value of all land, within each State, granted to or surveyed for any person, as such land and the buildings and improvements thereon, shall be estimated, according to such mode as the United States in Congress assembled shall, from time to time, direct and appoint.

The taxes for paying that proportion shall be laid and levied by the authority and direction of the legislatures of the several States, within the time agreed upon by the United States in Congress assembled." 1 Ell. Deb., p. 81.

Thus far, therefore, the States carried their point -that Federal monies should be contributed by them, and that Congress should not have the power of direct taxation, and that a tax on "land, buildings and

improvements thereon" was to be the source from where the Federal revenues were to be derived. No other property was to contribute to the Federal necessities.

It is to be noted that this tax on "land, buildings and improvements thereon" was not termed a direct tax nor an indirect tax, nor was it classified. The property was simply indicated as the property upon which the Federal tax was to be levied.

Had these words "land, buildings and improvements thereon" remained undisturbed, they might, perhaps, have given plausibility to an argument that by the use of the words "direct taxes" in the Constitution, such taxes alone were meant as would fall upon the "land, buildings and improvements thereon," which had been the sole resource of the Confederate Congress.

On Friday, the 18th of April, 1783, the Articles of Confederation were amended in Congress so as to read:

"Resolved by nine States, That it be further recommended to the several States to establish, for a term limited to twenty-five years, *** substantial and effectual revenues of such nature as they may judge most convenient for supplying their respective proportions of one million five hundred thousand dollars, annually, *** which proportion shall be fixed and equalized from time to time, according to the rule which is, or may be, prescribed by the Articles of Confederation." 1 Ell. Deb., p. 94.

The eighth article was amended so as to read:

"All charges of war, and all other expenses that have been, or shall be, incurred for the common defense for general welfare, *** shall be defrayed out of a common treasury, which shall be supplied by the several 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; which number shall be triennially taken and transmitted to the United States in Congress assembled, in such mode as they shall direct and appoint." 1 Ell. Deb., p. 95.

By these amendments. these results were obtained:

1. The limitation of the sources of the contributions from the States in proportion to the value of all land and the buildings and improvements thereon was stricken out, and the States were required to raise substantial and effectual revenues for the support of the Federal Government "of such nature as they might judge most convenient." Thereafter they raised the same by direct taxes, imposed by themselves. "Land, buildings and the improvements thereon," absolutely and forever by name disappeared from the domain of Federal taxation, and never thereafter appeared therein, save as they were conveyed by the use of the words "direct taxes."

2. The taxation necessary for Federal purposes was to be apportioned in proportion to the whole number for white and other free citizens and inhabitants, including those bound to servitude for a term of years, and three-fifths of all other persons, except Indians not paying taxes. This protected the slave States; that is, it rejected the two-fifths of their slaves from the enumeration, and connected population with taxation in precisely the same manner and by the same words as they were subsequently connected in the Constitution.

It will be further noted that this apportionment of taxation was not limited to direct taxes or to indirect taxes; but that all the property and citizens of the several States which each of the States was then taxing was made liable for the proportion of that State, according to its population, as so computed, for the needs

of the Federal government.

It will also be noted that the doctrine of representation was not discussed. There was no necessity at that time for such a reference. The States were represented in the Federal Congress by delegates - not less that two nor more than seven - and in determining questions in Congress each State had one vote, irrespective of the number of delegates. The idea of connecting representation with the same rule as was adopted for taxation, was necessarily an after-thought, and did not arise until the question of the constitution of the House of Representatives came up for discussion. It is to be further noted that by this amended eighth Article the States again triumphed and carried their point, that the Federal expenditure should be supplied by the several States directly.

Why was this phrase "land, buildings, and improvements thereon," in the original Articles, stricken out by this amendment? Mr. King, of Massachusetts, answers this inquiry. He said:

"According to the Confederation, ratified in 1781, the sums for the general welfare and defense should be apportioned according to the surveyed lands and improvements thereon in the several States; but that it hath never been in the power of Congress to follow that rule, the returns from the several States being so very imperfect." 2 Ell. Deb., p. 36.

Mr. King also said:

"In 1778, Congress required the States to make a return of the houses and lands surveyed; but one State only complied therewith - New Hampshire. Massachusetts did not. Congress consulted no rule. It was resolved that the several States should be taxed according to their ability." 2 Ell. Deb., p.

45. "Massachusetts has paid while other States have been delinquent. *** Requisitions on the States for that money were made. Who paid them? Massachusetts and a few others. *** But 1,200.000 dollars have been paid. And six States have not paid a farthing of it." Ibid., p. 56.

Mr. Justice Story, Story on the Constitution, Secs. 253, 265, said:

"The principle which formed the basis of the apportionment was sufficiently objectionable, as it took a standard extremely unequal in its operation upon the different States. The value of its lands was by no means a just representative of the proportionate contributions which each State ought to make towards the discharge of the common burdens. *** There were other defects. It will suffice for the present purpose to enumerate the principal heads. The principle of regulating the contributions of the States into the common treasury by quotas *** was objected to as unjust, unequal and inconvenient in its operation."

Therefore, there is this concurrent testimony that the words "land, buildings and improvements thereon" were intelligently rejected by the Confederate Congress as not being either a just, an equal, or a convenient source of revenue for the Federal Government, and if that was the opinion prior to the adoption of the Constitution, how comes it at a later day that the phrase "direct taxes" is to be interpreted as relating only to a tax on "land, buildings and improvements thereon," and thus to place the tax back upon that which had been previously rejected as the only source of Federal taxation?

The Compromise of the New Constitution

When the question of the adoption of the Constitution was under consideration in the several States, although there appears to have been a very general agreement of opinion as to the necessity of a firmer union and greater national power, including effective powers of taxation to be exercised by the Federal Government itself to an extent which should be adequate for its purposes, there were conflicting interests in, or as between, the respective States, and jealousies, and many points of objection, on behalf of particular States, in respect of denuding themselves of power, or granting to the Federal Government power to be exercised at its will over their citizens; and in devising the Constitution, to be submitted to the States for their adoption, which the Convention framing it of course ardently desired, it would naturally be expected, and we accordingly find, as the people and the conventions of States to whom the Constitution was submitted for approval found at the time, that it had been skilfully prepared, with a view of harmonizing the conflicting interests, appeasing the jealousies, removing as far as might be the objections, and presenting an instrument which might be deemed sufficiently fair and reasonable under the circumstances, and so far acceptable to all concerned, as that its adoption might be ultimately obtained; an object that was finally accomplished, though not without long and serious struggles.

The Constitution thus presented contained these features, viz:

1. The surrender by the States of their power to tax imports, and the transfer of it to the United States as an exclusive power, subject only to the prescribed rule of uniformity.

2. The grant to the United States of a power of imposing, subject only to the prescribed rule of

uniformity, such indirect taxes (being internal revenue taxes) as are embraced within the term excise, and likewise of imposing, subject only to the same prescribed rule, such other internal, indirect taxes (if any there be) as are embraced within the terms duties and imposts, or either of them, and not embraced within the term excise; these powers in respect to excises (and in respect of internal duties and impost if any, not being excises) being vested in Congress concurrently with like powers remaining in the States, except, that by means of the power to regulate interstate commerce, granted to Congress, the States were excluded from many resources of excise taxation which would have been otherwise available to them, and in respect of which Congress had plenary power, which in effect was exclusive; and except also, that in respect of one very extensive, and we suppose by far the most extensive, subject of excise taxation, viz., taxes on manufactures, the States were in general, or usually, practically precluded from imposing such taxes to material extent; because an attempt thus to tax their own manufacturers would practically spoil their market, as well in their own State as in other States, by reason of the inevitable competition of the untaxed like manufactures of other States, which they would be powerless to exclude or in any wise to tax; so that an attempt to tax their own manufacturers to any substantial extent, would naturally kill their business or drive them to change their locality; while plenary power to tax manufactures was vested in Congress, free from any such impediment, subject only to the prescribed rule of uniformity.

3. The States reserved their plenary power of taxing the property, real and personal, of their citizens, by what then were, as they still are, regarded as direct taxes, and by reason of the above mentioned complete surrender of their power to tax imports, and great narrowing of the range of their power to impose excise taxes, such power of direct taxation of property

constituted the chief resource left to the States, for

maintaining and carrying on the government and governmental affairs, not only of the State, but of its counties, towns and cities.

4. There was granted to the Federal Government a power to lay direct taxes, but in their imposition, the rule of uniformity of the burden upon the individual taxpayer, which was made a condition of the imposition of indirect taxes, was entirely discarded, and in place of it was substituted the rule of apportionment between the States, producing inevitably and deliberately, inequality in the different States, of the rate of tax upon the individual taxpayers.

The necessary effect of the inequality, thus deliberately and carefully provided for by the fundamental law, requiring the direct taxes to be apportioned among the States in proportion to their population is, that where the subject matter of the direct tax is found in one State, in greater proportion to its population than in another, the amount of tax imposed upon the individual taxpayer in the State having such greater proportion is thereby diminished correspondingly, and vice versa, increased correspondingly, in the State having the smaller proportion; so that, if one State has within it, twice the amount or extent of the taxable subject matter in proportion to its population that another State has, its individual taxpayers have to pay upon their individual portions of the taxable subject matter, only one half the rate of tax which is imposed upon a like amount or extent of the taxable subject matter in the other State.

This plain inequality is an intentional inequality, as clearly so as the equal representation of the smaller States in the Senate of the United States.

If the Constitution had intended to limit the taxation upon the basis of apportionment between the States, to taxes on real estate, it would have said so. Nothing would have been easier. The language actually used contains not even a suggestion of such a limitation.

The powers of indirect taxation by means of duties, imposts and excises, conferred upon Congress by the Constitution, were regarded as being, and, in fact, always have been, adequate for raising the moneys requisite for the purpose of the Federal Government under ordinary circumstances. The power of direct taxation was not expected nor intended to be exercised save under exceptional and extraordinary circumstances, such, for instance, as war, when the ordinary revenues derived by means of the indirect taxes might prove inadequate; and so in practice it had been treated. As the governmental expenditures of the States respectively, for themselves and their municipalities and other internal divisions, had to be met mainly by direct taxation upon property, direct taxation of such property by the United States also would be onerous, and more or less conflicting and embarrassing, and it was not intended that the Federal Government should resort to it unless in case of real necessity. The States were jealous of granting any such power, and gave it grudgingly. Manifestly the States having the larger proportion of wealth to population did not choose to grant it at all in any such shape as would permit the Federal Government to tax their wealth in pro rata proportion to its value, or on equality with the poorer States, nor without some suitable safeguard against the power being exercised without real necessity. The provision for apportionment of direct taxes among the States in proportion to the census affords such a safeguard, and doubtless was designed with that view.

With reference to its reasonableness, as between the several States respectively and their citizens, and the Federal Government, and more especially as between the seaboard States and the States of the interior, reference may appropriately be made to the circumstance, that the seaboard States, by the provision of the Constitution, freely gave up to the United States that exceedingly fruitful source of revenue, the taxation of duties upon imports from abroad, which belonged entirely to them,

inasmuch as they held the whole line of the coast and the ports at which the importations must arrive, and where the importers would have to pay the duties; while the interior States made no such cession and had no such thing to cede and never could have.

For an hundred and five years, from the foundation of the Federal Government down to the passage of the act of 1894, the original expectation and intention that the power of direct taxation, granted to Congress, should be exercised only under extraordinary circumstances, was recognized.

The only Acts of Congress professing to impose direct taxation have been:

1. The Act of July 14, 1798, providing what was intended as a war tax, for the purposes of the war with France, then supposed to be impending and to be so imminent that Washington was called from his retirement to take command of the army; to which he agreed, with the stipulation that he should actually begin.

2. The Acts of 1813 and 1815, imposing what were substantially war taxes, for the purposes of the war of 1812 with Great Britain.

3. The direct tax law of August 5, 1861, which was substantially a war tax for the purposes of the war of Northern Aggression. He lay out of view in what is said here, such misconstruction by Congress, as to what was really a direct tax as was exhibited in the framing of the Income Tax Laws of 1862 and subsequently during the war.

Thus, direct taxation was intentionally designed for use only during times of real national emergency, and operating for short periods of time. Direct taxation was deliberately subjected to the rule of apportionment, which

produced an inevitable inequality, further discouraging its use.

Chapter IV


The Constitution contains, in different places, two separate provisions, against direct taxation in any other measure than the one prescribed, of apportionment among the States. Art. I, Sec. 2, cl. 3 states,

"Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers...",

and Art. I, Sec. 9, cl. 4. states,

"Mo capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken."

The first provision embraces the second. Strike out the word "representatives" and the word "capitation", and the two provisions are substantially the same.

The one is a provision, pure and simple, not connected with anything else, prohibits direct taxation otherwise than by the prescribed method.

The other provision is that "Representatives and direct taxes shall be apportioned among the several States which may be included within this Union in accordance with their

respective numbers," which are to be ascertained by the census in the manner provided.

In this clause we find it declared in substance that direct taxation and representation in the lower house of Congress shall go hand in hand and be adjusted upon precisely the same measure.

And this clause in effect declares, by necessary inference, as plainly as if it were written out in so many words, that when the representatives of a State vote in the House of Representatives in favor of a bill imposing a direct tax, they must do so under the restraining influence of the consideration, that in the proportionate measure of the political power which they exercise in the imposition of the tax, must be the proportionate measure of the burden of that tax on the aggregate of their constituents.

The effective value of this provision, for preventing the imposition of a direct tax upon property in a State where considerable wealth is, by the force of numbers in States having comparatively little wealth, when the circumstances are not such as to necessarily and properly call for the exercise of the power of direct taxation which was provided merely for extraordinary exigencies, is manifest; and it is in this point that, in great measure, the value of the provision, as a protection to property, lies.

It was only by the misconstruction or verbal evasion, of ranking the Income Tax Laws of 1862 and 1894 as an indirect tax, which was really a direct tax, thereby transferring the tax to the other class, which is really provided for subjects of entirely different nature, that their passage became possible.

The question whether the words "direct taxes" embrace a General Tax on Incomes, or are limited to a tax on land only, is a question of fact to be decided according to the weight of evidence. The United States Supreme Court does not have the Constitutional power to strike out of the Constitution the word "direct" in the phrase "direct

taxes," and insert the word "land."

It is to be judicially determined whether upon the evidence the words "direct tax" and "direct taxes," at the time of the adoption of the Constitution, and in the judgment of the people who ordained and established it, were limited to a tax on land only.

The capitation tax is specifically named. Why was this done? Because the capitation tax, as it was then in force, in order to meet not only the necessities of the state, but also the requisitions issued by the Confederate Congress, had become especially obnoxious and odious. It is said in the books that it ran from four pounds to forty pounds per head.

Maryland, in her Bill of Rights, adopted on the 17th of November, 1776, asserted that the levying of taxes by the poll "is grievous and oppressive, and ought to be abolished." In the New York Convention, Mr. Williams said:

"A capitation tax is an oppressive species of tax. This may be laid by the general government. *** But where a great disparity of fortune exists, I insist upon it that it is a most unjust, unequal and ruinous tax." 2 Ell. Deb., p. 340.

Mr. Wilson, in Pennsylvania, said:

"The capitation tax is mentioned as one of those that are exceptionable. In some states, that mode of taxation is used, but I believe in many it would be received with great reluctance." 2 Ell. Deb., p. 502.

In Virginia, Mr. Mason said:

"For example, they may lay a poll tax. This is simply and easily collected, but is of all taxes the most grievous. Why the most grievous? Because it

falls light on the rich, and heavy on the poor. *** As to a poll tax, I have already spoken of its iniquitous operation. I need not say much of it, because it is so generally disliked in this state that we were obliged to abolish it." 3 Ell. Deb., pp. 264-5.

The people, therefore, having felt the pressure of this capitation tax, determined that it should not be laid by the Federal government, except upon the basis of population; that is, at so much per capita, throughout the Union. To insure this result they nominated the tax in the Constitution.

All other internal taxes the people left to the use of the words "direct tax" and "direct taxes".

Whatever indefiniteness or ambiguity may be alleged to attach to these constitutional phrases as one looks back at them through the mists and clouds of two centuries, it cannot be said that any such doubt or ambiguity attaches to them now.

The phrase "direct taxes," as used in the constitutions of the states and in the statutes, had by universal consent, judicial as well as otherwise, been construed not to be limited to a tax on land only, but to include a General Tax on Income.

The Supreme Court of Missouri has so asserted:

"The Privy Council of England has said: 'An income tax is always spoken of as a direct tax. and is generally looked upon as a direct tax of the most obvious kind. To deny it that character would run counter to the common understanding of men on this subject, which is one main clue to the meaning of the legislature." Glasgow v. Rowse, 43 Mo. 479 (1869), 479. [Emphasis added]

This is high judicial authority for the position that in interpreting the words of a statute, that

interpretation is to be rejected which runs counter to the common understanding of men.

Both American and English lexicographers agreed that a direct tax included a tax on income when the Constitution was adopted; the encyclopaedists concurred, and the political economists assented.

The State Department, in its published Reports, during the nineteenth century, established the fact that Austria, Bohemia, France, Germany, Sweden, and Switzerland, as well as Great Britain, have always defined direct taxes as including a tax on income, and Great Britain has enforced the income tax at intervals since the year 1435.

There are two reasons for this designation, when state taxation is under consideration:

1. States taxes, since they first began to be levied and collected, have always been called direct taxes. This is asserted by Cooley with positiveness. The contemporaneous evidence sustaining him will be alluded to hereafter.

2. The incidence of direct taxes is upon the property and person of the owner, and there is no escape from their payment by him directly and in the first instance, nor has he any known recourse for its reimbursement.

The inquiry now arises, whether the practical interpretation to the words "direct taxes" by the people and the laws of the several States, was in any way limited or restricted by the proceedings of the Philadelphia Convention. In speaking of this Convention the Supreme Court said, in Daniels v. Tierney, 102 U.S., p. 419:

"The circumstances which surrounded the convention and controlled its action are a part of the history of the times, and we are bound to take judicial notice of them."

As previously stated, there are two reports of these proceedings; Elliot's and Madison's. On the title page of Elliot's Reports, are these words, "Published under the

sanction of Congress." In the preface to the second edition, Mr. Elliot used this language:

"Honored by the adoption of resolutions in both Houses of Congress, directing these volumes of

debates to be furnished for the use of the Senators

and Representatives, and gratified by an extensive

demand elsewhere for this work, the editor has been

induced to publish a second edition, much enlarged and improved."

The two reports are of equal credibility.

One of the circumstances above alluded to by the Supreme Court was the struggle still kept up between the delegates and the States which they represented, as to the right of the Federal Government to have the power of directly assessing and collecting its own taxes. The question constantly recurred in the Philadelphia debates, and it was not ended until after the amendments proposed by Massachusetts, South Carolina, New Hampshire, New York and Rhode Island had been rejected. The struggle ran through not only the Philadelphia Convention, but into the States, and with the result that the States just enumerated proposed an amendment that Congress "do not lay direct taxes until Congress shall have first made a requisition upon the States, agreeably to the census fixed in said Constitution." There was more of a conflict over this point in the conventions than there was over the question of apportioning representatives and direct taxes to population, or the latter to representation. The various mutations of the different articles of the various constitutions which were proposed verify this assertion.

Before referring more particularly to these various propositions, it is proper to say that in examining the debates it must be borne in mind that the words "direct taxation" do not occur in the Constitution. That instrument is limited to the words "direct tax" and "direct taxes." A careful examination of the debates

warrants the assertion that the phrase "direct taxation" as used in the Philadelphia Convention, was not always used as a synonym for "direct taxes." "Direct taxes" implies one of two things; either the objects upon which the tax is placed, or the incidence of the tax upon the property and upon the person of its owner. "Direct taxation," in very many instances, refers to the modus operandi of collecting the tax; that is, whether the power should be given to Congress to collect taxes by direct taxation, or whether the power to collect Federal taxes should be exercised only after requisitions upon the states had been dishonored. It seems to be necessary to bear this in mind in consulting the debates, and not to assume that "direct taxation" is a synonym for "direct taxes."

It is also to be mentioned that the language of Messrs. Chase, Adams and Payne, that population was a fair index and a good criterion of wealth and of property, was carried through the Philadelphia Convention adversely to Mr. Hamilton's statement in No. 21 of the Federalist, that "neither the value of lands nor the numbers of the people, which have been successively proposed as the rule of State contributions, has any pretension to being a just representative."

It is further to be observed that the language of the amended eighth Article of Confederation that the expenses of the Federal government "shall be defrayed out of a common treasury, which shall be supplied by the several 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," survived Mr. Hamilton's criticism, and was adopted in the Constitution in the first clause thereof, which is now under consideration.

It is not probable that Mr. Hamilton surrendered his individual opinion when he argued in the Hylton case

[Hylton v. United States. 3 U.S.(3 Dall.) 171 (1796). discussed later], although that opinion had been rejected by the delegates to the Philadelphia Convention.

But the struggle over the direct taxation went on. Mr. Pinckney's draft of the Constitution regulated direct taxes according to the whole number of inhabitants and left the power to Congress. Mr. Paterson's resolution authorized Congress to make a requisition upon the basis of population, estimated according to the old Articles of Confederation. Mr. Wilson introduced a resolution providing that in order to ascertain the alterations that may happen in the population and wealth of the several States, a census should be taken; thus re-affirming the original doctrine that population was the true criterion and index of wealth, and this resolution was thereupon adopted:

"That in order to ascertain the alterations that may happen in the population and wealth of the several States, a census shall be taken."

Then came the appearance of representation, and it was moved and agreed to that direct taxes ought to be proportioned according to representation, thus striking out population and substituting the number of representatives as the basis for the apportionment of direct taxes. The amendment rejected representation as the basis of taxation, and substituted the old rule of population, computed in the given manner. It was again moved that representation ought to be proportioned according to direct taxes, and in order to ascertain the alterations in the direct taxes which might be required, that a census should be taken. This was the introduction of the rule finally adopted, that representation ought to be proportioned in the same manner as taxation.

There was an animated contest over this proposition, and there were extended debates over the question whether direct taxes should be proportioned to representation or

according to population. Finally, on the 16th of July, 1787, this resolution was adopted:

"Representation ought to be proportioned according to direct taxation. And in order to ascertain the alteration in the direct taxation which may be required, from time, to time by changes in the relative circumstances of the States - Resolved, That a census be taken, *** and that the Legislature proportion the direct taxation accordingly."

There was again debate over this suggestion, which culminated in the draft of a constitution which apportioned direct taxation according to the number of the representatives. This was re-modelled, and on the 12th of September, 1787, a revised draft of the Constitution was introduced, which provided that "representatives and direct taxes shall be apportioned on the basis of population," and under the rule prescribed by the Articles of Confederation. On this same 12th of September, 1787, the revised draft of the Constitution contained these words:

"That no capitation tax shall be laid unless in proportion to the census hereinbefore directed to be taken."

Then there came a debate in which these questions were discussed:

The States were asked to give the power of internal taxation, now exercised by them respectively for the benefit of the general government, directly to Congress, so that it may exercise such power concurrently with the States, and directly upon the property and inhabitants of the States.

This was the understanding of what the States were asked to do, and, after the Constitution was adopted, of what they had done.

In the Massachusetts Convention, Mr. Parsons said:

"Congress have only a concurrent right with each State, in laying direct taxes, not an exclusive right; and the right of each State to direct taxation is equally extensive as the right of Congress." 2 Ell. Deb., p. 93.

In New York, Chancellor Livingston said:

"It is observed that, if the general government are disposed, they can levy taxes exclusively. But they have not an exclusive right. *** Their right is only concurrent." 2 Ell. Deb., p. 346.

Mr. Hamilton said:

"Unless, therefore, we find that the powers of taxation are exclusively granted, we must conclude that there remains a concurrent authority." 2 Ell. Deb., p. 363.

The States were also asked to give up their right of laying imposts and duties on imports and exports, the surrender of which right would confine them thereafter to their own internal taxes. They said in substance: If we surrender the right to imposts and duties, and if we divide the power of direct taxation by giving to Congress a concurrent right with ourselves to lay direct taxes, such as have heretofore existed in our states, how are we to guard the exercise of this power so that it shall not be used oppressively? How is it to be restricted so that Congress will not have the right to impose undue burdens upon the states?

The answer to this was: Such restriction can be properly imposed with justice to ourselves and to Congress by limiting the exercise of this concurrent power to the rule of population, which is the index and criterion of

wealth. If we give this power to the Federal Government to come into the states and tax the same objects which we are there taxing, the amount of such tax on behalf of Congress must be apportioned upon the basis heretofore obtaining, and so that each state will know precisely how much it is called upon to contribute.

It would indeed be singular if, when the states were giving to the Federal Government a concurrent right to levy and collect the direct taxes which they themselves were collecting, only the right to collect this unjust, unequal and inconvenient tax on lands, actually passed. This limitation, if it exists, does not arise from the language which the states used, "direct taxes," but only from an interpretation which, without supporting evidence, excludes the residue.

The struggle was, first, to require Congress to apply to the states before having the right of direct taxation. Second, if that could not be carried, then to limit the right of direct taxation to population.

Mr. Martin voiced this when he said:

"Many of the members, and myself in the number, thought that states were much better judges of the circumstances of their citizens, and what sum of money could be collected from them by direct taxation, *** and that the general government ought not to have the power of laying direct taxes in any case but in that of the delinquency of a State." 1 Ell. Deb., p. 369. [Emphasis added]

This belief of the states that they had limited the power of assessing and collecting direct taxes to the rule of population, is clearly shown in the debates in the State Conventions.

In Massachusetts, Mr. King said:

"It is a principle of this Constitution, that representation and taxation should go hand in hand.

*** By this rule are representation and taxation to be apportioned." 2 Ell. Deb., p. 36. [Emphasis added]

Mr. Dawes said:

"The rule laid down in the paragraph is the best that can be obtained for the apportionment of the little direct taxes which Congress will want. *** There is a prejudice against direct taxation, which arises from the manner in which it has been abused by the errors of the old Confederation." 2 Ell. Deb., pp. 42-44.

Mr. Pendleton, in Virginia, said:

"The apportionment of representation and taxation by the same scale is just. *** By this just apportionment Virginia is put on a footing with the small States in point of representation and influence in councils." 3 Ell. Deb., p. 41.

Mr. Nicholas said:

"The amount of the sums to be raised of the people is the same, whether the State Legislatures lay the taxes for themselves, or for the general government." 3 Ell. Deb., p. 99.

Governor Randolph said:

"In this new Constitution, there is a more just and equitable rule fixed - a limitation beyond which they cannot go. Representatives and taxes go hand in hand; according to the one will the other be

regulated. The number of representatives is determined by the number of inhabitants; they have nothing to do but to lay taxes accordingly." 3 Ell. Deb., p. 121. [Emphasis added]

Mr. Nicholas said:

"The proportion of taxes are fixed by the number of inhabitants. Each State will know, from its population, its proportion of any general tax. As was justly observed by the gentleman over the way (Mr. Randolph), they cannot possibly exceed that proportion; they are limited and restrained expressly to it. The State Legislatures have no check of this kind. Their power is uncontrolled. *** What will be the consequence of this? Each State must pay its proportion of taxes, and its representation is to be equal to its taxes." 3 Ell. Deb., pp. 243-4, 100. [Emphasis added]

Mr. Randolph said:

"When any sum is necessary for the general government, every State will immediately know its exact proportion of it, from the number of the people and representatives." 3 Ell. Deb., p. 122.

The States, therefore, having relinquished imposts and duties, and given to Congress a concurrent power to collect direct taxes, limited the exercise of the collection of such taxes to the rule of population. Therefore, the phrase "representation and direct taxes;" therefore, the phrase "No capitation tax shall be laid unless in proportion to the census hereinbefore directed to be taken." This latter phrase was, on the 14th of September, 1787, amended on motion of Mr. Read. He:

"[M]oved to insert after 'capitation' the words 'or

other direct tax.' He was afraid that some liberty might otherwise be taken to saddle the States with the readjustment by this rule of past requisitions of Congress, and that his amendment, by giving another cast to the meaning, would take away the pretext." 5 Ell. Deb., p. 545. [Emphasis added]

Mr. Williamson seconded the motion, and the same was adopted.

Mr. Read was a delegate from Delaware, a State in

which, according to the statement of Mr. Wolcott, the

citizens were taxed at one-fifth of their income, and

which State was largely in arrears in the payment of its quotas.

Bearing in mind what Mr. Dawes of Massachusetts had said:

"There is a prejudice against direct taxation, which arises from the manner in which it has been abused by the errors of the old Confederation, and that Congress had multiplied their requisitions on the States,"

It is easily to be understood that Mr. Read's motion was intended to express a judgment that Congress should not have the right to readjust unsettled differences arising from quotas not yet paid or fully paid by the States, or to make any future demands, unless upon the basis of the census, which would throw the burden upon all the States, according to population. These burdens had been originally discharged by State taxes on lands, on polls. on incomes, where they were paid, and on other articles, and all such State taxes were in existence when Mr. Read moved his amendment. Therefore, the effect of adding the words "or other direct tax." so that the sentence should read "No capitation or other direct tax shall be laid, unless in proportion to the census." was to include therein not only a capitation tax, but also all the other

taxes which the States at that time were collecting to pay their Indebtedness to the general government.

This was confirmed by the Wolcott report on "Direct Taxes" in 1796 and the Gallatin report of 1812.

Thus far, therefore, there was nothing in the debates to indicate that the words "direct tax" were to have a restricted and limited meaning, or were to apply only to taxes on land and taxes on polls.

Mr. Madison's Journal is printed as the fifth volume of Elliot's Debates. He there stated that:

"Gouverneur Morris moved to add to the clause empowering the legislature to vary the representation according to the principles of wealth and number of inhabitants, a proviso that taxation should be in proportion to representation. *** He admitted that some objections lay against his motion, but supposed they would be removed by restraining the rule to direct taxation. With regard to indirect taxes on exports and imports and on consumption, the rule would be inapplicable." [Emphasis added]

Having so varied his motion by inserting the word "direct," Morris secured passage as follows:

"Provided always, that direct taxation ought to be proportioned to representation." 5 Ell. Deb., p. 302.

Mr. Ellsworth moved to amend, in substance. Id., p. 302, so that the rule of contribution by direct taxation for the support of the government of the United States should be the rule as stated in the Articles of Confederation.

In the debates on the 20th of August, 1787, Id., p. 451, Mr. King asked what was the precise meaning of direct taxation? No one answered. This inquiry, it is to be

observed, was not "What is meant by a direct tax. or by direct taxes?" If so, there would doubtless have been an answer that by direct taxes was such taxes as the States were then paying; but having asked the question "What was meant by direct taxation?" he left it to be inferred that he used the phrase •direct taxation" not with reference to the objects upon which direct taxes were to be assessed and collected, but that he had reference to the same question of modus operandi, and he asked "What was meant by direct taxation?" that is, whether Congress should have power to levy and collect the tax, or whether requisitions therefor should be first made upon the States. The question was answered by Mr. Gerry, if it related to the modus operandi of taxation, for he moved, that:

"[F]rom the first meeting of the Legislature of the United States, until a census shall be taken, all moneys for supplying the public treasury by direct taxation shall be raised from the several States according to the number of representatives respectively in the first branch;" Id., p. 451.

Thus restoring the supremacy of the States in the matter of collecting whatever taxes were to be called "direct."

Mr. Langdon objected that this would bear unreasonably hard against New Hampshire, and Mr. Martin said that direct taxation should not be used but in cases of absolute necessity, and then the States would be the best judges of the mode, Id., pp. 451, 453. This shows that the phrase "direct taxation" then had reference to the mode of collecting the direct tax. and did not refer to the subject matter upon which such taxes were to be imposed.

Mr. Dickinson and Mr. Wilson, on the 13th of September, 1787, moved to strike out the words "and direct taxes" in the paragraph which read "representatives and direct taxes

shall be apportioned," as improperly placed in a clause relating merely to the constitution of the House of Representatives, Id., p. 540. Mr. Morris said:

"The insertion here was in consequence of what had passed on this point; in order to exclude the appearance of counting the negroes in the representation. The including of them may now be referred to the object of direct taxes, and incidentally only to that of representation." [Emphasis added]

The motion was lost. The practical result, therefore, was that the old words of the amended Articles of Confederation were taken as affording the standard for both taxation and representation. The South secured the exclusion of two-fifths of its slaves in apportioning the taxes, and the North secured the exclusion of the same two-fifths in apportioning the representatives. The latter object was attained, as Mr. Morris said, "incidentally." leaving the ostensible exclusion as referable to taxes only, as it had been under the Confederation. The North was satisfied to have the apportionment of representation controlled by the same rule of taxation, and to which latter rule the States had theretofore consented. So long as the rule was adopted for controlling both representation and taxation, it was immaterial whether such rule was introduced "incidentally" or otherwise.

It is evident, therefore, that the interpretation given by the people and the laws of the several states to the words "direct taxes" was not limited or restricted by any of the proceedings of the Philadelphia Convention. It is conclusively and affirmatively established that the people, as represented by their delegates to the State Conventions called to adopt and ratify the Federal Constitution, did not li»it the phrase "direct taxes" to a

tax on land only.

In his preface to the debates, Mr. Elliot used this language:

"In expounding parts of the Constitution which seem extremely doubtful, the publication of the proceedings and debates of the States must at least be useful, for what the States really intended to grant to the general government must be looked for in their acts and in their discussions, which manifest their intentions in a manner peculiarly satisfactory touching constitutional topics."

In Massachusetts, Mr. Dawes, on the 18th of January,

1788, when speaking of Article I of the Constitution,

"representatives and direct taxes shall be apportioned," said:

"As to the rule of apportioning such taxes, it must be by the quantity of lands, or else in the manner laid down in the paragraph under debate. But the quantity of lands is an uncertain rule of wealth. The rule laid down in the paragraph is the best that can be obtained. *** Massachusetts, willing to pay her part, made her own trade law. *** Thus we lost what little revenue we had, and our only course was to a direct taxation." 2 Ell. Deb., pp. 41, 42. [Emphasis added]

Mr. Adams said:

"They tell you that the exercise of the power of laying and collecting direct taxes might greatly distress the several States, and render them incapable of raising moneys for the payment of their respective State debts, or for any purpose. You are pleased to propose to us that it be a recommendation that 'Congress do not lay direct taxes but when the

moneys arising from the impost and excise shall be insufficient for the public exigencies.'" 2 Ell. Deb., p. 132.

Mr. Ellsworth, of Connecticut, said:

"Direct taxation can go but little way towards raising a revenue. To raise money in this way, people must be provident; they must constantly be laying up money to answer the demands of the collector. But you cannot make people thus provident. If you would do anything to the purpose, you must come in when they are spending, and take a part with them. This does not take away the tools of a man's business, or the necessary utensils of his family; it only comes in when he is taking his pleasure, and feels generous; when he is laying out a shilling for superfluities, it takes twopence of it for public use, and the remainder will do him as much good as the whole." 2 Ell. Deb., p. 191. [Emphasis added]

This was the income tax pure and simple. and brought within the phrase "direct taxation."

In New York, Chancellor Livingston said:

"Why, they must have recourse to direct taxes; that is, taxes on land and specific duties." 2 Ell. Deb., p. 341. [Emphasis added]

Mr. Jay said:

"It ought to be considered that direct taxes were of two kinds, general and specific." 2 Ell. Deb., p. 331. [Emphasis added]

Mr. Hamilton said:

"[I]f Congress, in times of great danger and distress, should be driven to this resource (internal taxation), they will undoubtedly adopt such measures as are most conformable to the laws and customs of each state. They will take up your own codes, and consult your own systems. This is a source of information which cannot mislead, and which will be equally accessible to every member. It will teach them the most certain, safe, and expeditious mode of laying and collecting taxes in each state. 2 Ell. Deb., p. 266. * * * It has been proved, as far as probabilities can go, that the federal government will, in general, take the laws of the several states as its rule, and pursue those measures to which the people are most accustomed." Id., p. 367. [Emphasis added]

After alluding to direct taxes, he outlined as indirect taxes the imposts and excises on articles of growth and manufacture of the United States. 2 Ell. Deb., pp. 368-369.

In Virginia, Mr. Nicholas said:

"The amount of the sums to be raised of the people is the same, whether the State legislatures lay the taxes for themselves, or for the general government; whether each of them lays and collects taxes for its own exclusive purposes; the manner of raising it only is different." 3 Ell. Deb., p. 99.

Mr. Mason said:

"The sums necessary for the Union would be then laid by the States, by those who know how it can best be raised; by those who have a fellow - feeling for us." 3 Ell. Deb., p. 31.

Mr. Madison said that:

"Congress could select the most proper objects and

distribute the taxes in such a manner as that they should fall in a due degree on every member of the community. They will be limited to fix the proportion of each State, and they must raise it in the most convenient and satisfactory manner to the public." 3 Ell. Deb., p. 255. * * * the most proper articles will be selected in each state. If one article, in any state, should be deficient, it will be laid on another article." Id., p. 307. * * * it has been amply proved that the general government can lay taxes as conveniently to the people as the state governments, by imitating the state system of taxation. Id., p. 328. [Emphasis added]

Mr. Marshall said (and he was subsequently the Chief Justice of the United States Supreme Court):

"The objects of direct taxes are well understood. They are but few. What are they? Lands, slaves, stock of all kinds, and a few other articles of domestic property." 3 Ell. Deb., p. 229. * * * They (the representatives) will have the benefit of the knowledge and experience of the state legislature. They will see in what Banner the legislature of Virginia collects its taxes. Id., p. 230. * * * Why cannot Congress Bake thirteen distinct laws and impose the taxes on the general objects of taxation in each state." Id., p. 235. [Emphasis added]

What were the direct taxes to which Mr. Marshall was referring? Not the direct taxes of the United States, because the United States had yet no power to levy any tax. whether direct or indirect. Therefore, when Mr. Marshall spoke of "direct taxes" he was speaking of them as he understood them and as they existed in the States and in the State of Virginia, from which he was a


Mr. Wolcott. in his Report to Congress, when speaking of taxes assessed under the laws of Virginia of 1781, 1782, said that "taxes were assessed on lots and houses in towns;" being the "lands" of Mr. Marshall; on "slaves," being the "slaves" of Mr. Marshall; on "stud horses, jackasses, other horses and mules," being the "stock of all kinds" of Mr. Marshall; and on "billiard tables, four - wheeled carriages, phaetons, stage wagons, and riding carriages with two wheels," being the "few other articles of domestic property" referred to by Mr. Marshall, as being the objects of direct taxes which were then well understood.

It is fair to infer from this statement of Mr. Marshall that if he had been a member of the Court at the date of the decision in the Hylton case, he would not have concurred in the opinions of Justices Chase, Paterson and Iredell. Presumably, he would have said, and in his own exquisite diction, which it is not possible to imitate: "Congress, at the time of the adoption of the Constitution, did not have any system of taxation. The State of Virginia had such a system, and had imposed a tax upon carriages. Such tax was known to the people, and was paid by them as a direct tax. The States gave to the Federal government a concurrent power to lay such direct taxes as the States were then imposing. In the exercise of this power, Congress has laid a tax upon carriages, and authorized it to be collected by Federal officers. The fact that such reimposition of the tax is by a Federal law does not change the character of the tax. It is still a direct tax and cannot be converted into an indirect tax simply and only because it is imposed and collected under a Federal law."

When Congress undertook to pass the law which was under judgment in the Hylton case. Mr. Madison said that he should vote against it because it was unconstitutional. Why? Because the tax was a direct tax.

In Mr. Madison's letter to Jefferson of the 11th of

May, 1794, referring to the report of a committee on taxation, he wrote:

"It is particularly included besides stamp duties, excises on tobacco and sugar manufactured in the United States, and a tax on carriages as an indirect tax, * * * and the tax on carriages succeeded, in spite of the Constitution, by a majority of twenty, the advocates of the principle being reinforced by the adversaries to luxury. * * * This is another proof of the facility with which usurpation triumphs where a standing corps always on the watch for favorable conjunctions, and directed by the policy of dividing their honest but undiscerning adversaries. * * * By breaking down the barriers of the Constitution and giving sanction to the idea of sumptuary regulations, wealth may find a precarious defence in the shield of justice." [Emphasis added]

This shows the occasion of Mr. Madison's "despondency." as alluded to in the Springer case.

Even at this late day and aside from the necessities of these particular cases, the names of Marshall and Madison are regarded with a respect equally high at that which appertains to the names of Chase, Paterson and Iredell. Mr. Nicholas said:

"The proportion of taxes are fixed by the number of inhabitants, and not regulated by the extent of territory. Each State will know from its population its proportion of any general tax." 3 Ell. Deb., pp. 243-4.

Mr. Madison said:

"The subject of direct taxation is perhaps one of the most important that can possibly engage our attention. * * * Mr. Monroe yesterday, seemed to

conceive, as an insuperable objection, that, if land were made the particular object of taxation, it would be unjust, as it would exonerate the commercial part of the community; that, if it were laid on trade, it would be unjust, in discharging the landholders; and that any exclusive selection would be unequal and unfair. If the genera] government were tied down to one object, I confess the objection would have some force in it; but if this be not the case, it can have no weight. If it should have a general power of taxation, they would select the most proper objects, and distribute the taxes in such a manner as that they should fall in a due degree on every member of the community. They will be limited to fix the proportion of each State, and they must raise it in the most convenient and satisfactory manner to the public." 3 Ell. Deb., pp. 243. 254. [Emphasis added]