Direct tax

“ The only limitations imposed are that direct taxes, including the capitation tax, shall be apportioned; that duties, imposts, and excises shall be uniform; and that no duties shall be imposed upon articles exported from any state. With these exceptions, the exercise of the power is, in all respects, unfettered.
'If a tax upon carriages, kept for his own use by the owner, is not a direct tax, we can see no ground upon which a tax upon the business of an insurance company can be held to belong to that class of revenue charges. ”

“ An excise tax, which the Constitution requires to be uniform, laid upon the shifting at death of some of the incidents of property, could hardly be thought to be a direct tax which must be apportioned. ”

“ The most natural and practical test by which to determine what is a direct tax in the sense of the constitution is to ascertain whether the tax can be apportioned among the several states according to their respective number, with reasonable approximation to justice, fairness, and equality to all the citizens and inhabitants of the country who may be subject to the operation of the law. ”

“ The power to tax is a dominant power over commerce. Because the greater or more threatening burden of a direct tax on commerce is coupled with the lesser need to a State of a particular source of revenue, attempts at such taxation have always been more carefully scrutinized and more consistently resisted than police power regulations of aspects of such commerce. ”

“ And, in my judgment, there can be no honest attempt at a fair adjustment of the burdens of a direct tax upon the general property of this or any other country which does not make a decent effort at an equalization in proportion to the true value of each article which is taxed. The true value of an article is necessarily its fair, full value, nothing more and nothing less. If we levy general property taxes, we are compelled to require by law that all property subject to the levy shall be taxed in proportion to its value, and such a rule is inevitably a law for a "full rendition." ”

“ It was clear that the Government must have a revenue, and that revenue could only be raised by direct or indirect taxation; and he preferred, under the circumstances of the country, indirect taxes, which the people did not feel, and were not compelled to pay unless they liked; for the poor were not compelled to buy foreign imports, but if they bought them they must pay a tax to government. ”

“ 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. ”

“ The equality of this tax can only be seriously questioned on two grounds. The first is, that a miser may escape it This objection applies to all taxes on expenditure: nothing but a direct tax on income can reach a miser. But as misers do not now hoard their treasure, but invest it in productive employments, it not only adds to the national wealth, and consequently to the general means of paying taxes, but the payment claimable from itself is only transferred from the principal sum to the income afterwards derived from it, which pays taxes as soon as it comes to be expended. ”

“ Indirect taxes can be evaded by abstaining from the activity that is taxed. They can usually also be shifted to others, and are generally paid by the consumer, or user of the article that is taxed. In general, direct taxes are levied by the State and municipal governments, while the National government derives its revenue (with the exception of the income tax) mainly from indirect taxes. ”

“ The estimated revenue from these sources was $877,500, affording a small excess over the sum which would be required to pay the interest on the assumed debt. The policy of the measure was discussed in a well-digested and able argument, detailing many motives, in addition to those assigned in his original report, for preferring the system now recommended to accumulated burdens on commerce or to a direct tax on lands.
A new tax is the certain rallying point for all those who are unfriendly to the administration or to the minister by whom it is proposed. ”

“ Abolition of industrial trusts, those that exist because of tariff protection and those that exist because of freight discriminations whether by rebates, special rates or otherwise.
7. Taxation that will tax every man according to his accumulated wealth—tax property, not man; collect state and municipal taxes by direct tax on the accumulated wealth of society assessed at actual cash value; collect national taxes by a direct tax on the earnings of accumulated wealth, whether large or small. Have only direct taxes, for indirect taxes cover injustice and extravagance. ”

“ And although there have been, from time to time, intimations that there might be some tax which was not a direct tax, nor included under the words 'duties, imports, and excises,' such a tax, for more than 100 years of national existence, has as yet remained undiscovered, notwithstanding the stress of particular circumstances has invited thorough investigation into sources of revenue. ”

“ As in the Panhandle Case, so in the present, the receipt of the thing contracted for constitutes the transaction by which the tax is measured and on which the burden rests. We may thus paraphrase what was there said: To use the value and amount of the goods and services furnished to the United States as a measure of the tax is in substance and effect to tax the transaction itself. The amount of the tax rises and falls in direct ratio to the contract value of the goods and services rendered to the government. This is to tax the sale; and that is to tax the United States. ”

“ On top of this condition the legislature last year laid a direct tax of eighteen millions of dollars upon our people, and there is every indication that it will be several years before it becomes unnecessary to lay a direct tax either larger or smaller than that put upon us last year. ”

“ Nevertheless, nothing is more certain than that, as long as this invidious and unjust accumulation of the whole direct tax is on one class of 150,000 persons, it will be highly popular with the remaining 29,000,000, and that the popular journals will never cease to resound with the propriety of extending still farther the partial burden of direct, and the general exemption under the name of Free Trade from the indirect taxes. ”

“ Courts are not possessed of instruments of determination so delicate as to enable them to weigh the various factors in a complicated economic setting which, as to an isolated application of a State tax, might mitigate the obvious burden generally created by a direct tax on commerce.' Freeman v. ”

“ There is a recognized distinction between a non-discriminatory tax upon the property of an agent of government, albeit the property is used in, or has relation to, the business of the agency-where there is only a remote, if any, influence upon the exercise of the functions of government-and a tax which is deemed to impose a direct burden upon the exertion of governmental powers. ”

“ But a tax is not a direct burden merely because it is laid upon an indispensable instrumentality of such commerce, or because it arises exclusively from transactions in interstate commerce. Thus, a tax is valid although imposed upon property used exclusively in interstate commerce, Transportation Co. ”

“ And, further, in determining whether a tax has such a direct relation to interstate commerce as to be an exercise of power prohibited by the commerce clause, our decision must regard the substance of the exaction, its operation and effect as enforced,-and cannot depend upon the manner in which the taxing scheme has been characterized. ”

“ But in addition to these two forms of direct taxation indirect taxation also was coming more and more to the front. The right of the king to grant licences to bring goods into or to trade within the realm, a right springing from the need for his protection felt by the strangers who came there for purposes of traffic, laid the foundation of our taxes on imports. Those on exports were only a part of the general system of taxing personal property which we have already noticed. ”

“ And it matters not in what form these taxes are imposed upon the people, whether in the shape of municipal subscriptions of stock, to be paid by assessments upon the people; by donations of land or money, to be repaid by imposing a larger price upon lands sold to the citizen; by indirect taxation, or by special local elections held in cities, towns, or counties,—the compulsory taxation of the property of individuals, under our system of government, can only be imposed for governmental or public purposes. Taxes are levied for the support of the government in all its departments ”

“ The very moderately graduated income and inheritance taxes which are now common, small capitalists have tolerated principally on the ground that the State is in absolute need of them for essential expenses. We may soon expect a period when the present rapid expansion of this form of taxation as well as other direct taxes on industry, building, corporations, etc., will be checked somewhat by the new revenues obtained from the profits of government enterprises and the taxation of ground values. ”

“ I recommend to Congress the abolition of the minimum principle, or assumed, arbitrary, and false values, and of specific duties, and the substitution in their place of ad valorem duties as the fairest and most equitable indirect tax which can be imposed. By the ad valorem principle all articles are taxed according to their cost or value, and those which are of inferior quality or of small cost bear only the just proportion of the tax with those which are of superior quality or greater cost. The articles consumed by all are taxed at the same rate. ”

“ And the amount of the taxation may be determined by the value of the property, or its use, or its capacity, or its productiveness. It may touch business in the almost infinite forms in which it is conducted, in professions, in commerce, in manufactures, and in transportation. Unless restrained by provisions of the Federal Constitution, the power of the State as to the mode, form, and extent of taxation is unlimited, where the subjects to which it applies are within her jurisdiction. ”

“ The exemption of interstate business from the type of State taxation here involved is now made complete.
A business engaging in activities in two or more States should bear its part of the tax burdens of each. If valid, non-discriminatory taxes imposed in these States create 'multiple' burdens, such 'burdens' result from the political subdivisions created by our form of government. They are the price paid for governmental protection and maintenance in all States where the taxpayer does business. ”

“ This inherent limitation upon the taxing power forbids the imposition of taxes which are unequal in their operation upon similar kinds of property, and necessarily strikes down the gross and arbitrary distinctions in the income law as passed by congress. The law, as we have seen, distinguishes in the taxation between corporations by exempting the property of some of them from taxation, and levying the tax on the property of others, when the corporations do not materially differ from one another in the character of their business or in the protection required by the government. ”

“ For instance, should a legislator, wishing to impose a new tax, choose that which would be theoretically the most just? By no means. In practice the most unjust may be the best for the masses. Should it at the same time be the least obvious, and apparently the least burdensome, it will be the most easily tolerated. It is for this reason that an indirect tax, however exorbitant it be, will always be accepted by the crowd, because, being paid daily in fractions of a farthing on objects of consumption, it will not interfere with the habits of the crowd, and will pass unperceived. ”

“ This brought me to the conclusion that, “when a reduction of taxation is about to take place, it is exceedingly important that great care and judgment should be exercised in the selection of the tax to be reduced, in order that the maximum of relief may be afforded to the public with the minimum of injury to the revenue.” ”

“ It being beyond dispute, therefore, that the sum of taxation in this case was fixed almost exclusively by the gross earnings from interstate commerce, who, may I ask, can point out the distinction between taxing the gross earnings derived from interstate commerce and taxing a valuation based on such earnings? The elementary principle so often applied by the court, that a tax which may not be imposed directly cannot be levied indirectly, is decisive. ”

“ There is little or no uniformity among the taxation schemes of the one hundred comparatively free and sovereign states as economic and other conditions vary greatly in different sections of the continent. Every state has ten basic constitutional provisions which cannot be modified except by consent of the federal supreme court, and one of these articles prevents levying a tax of more than one per cent on the value of any property in any one year, homesites, whether in city or country, being exempted. ”

“ Taxation would not then fall unduly on the man of moderate means; and while none would be entirely exempt from assessment, all, in proportion to their pecuniary abilities, would contribute toward the support of the State. A modification of the internal-revenue system, by a large reduction in the number of articles now subject to tax, would be followed by results equally advantageous to the citizen and the Government. ”