Article 1, Section 9, Clause 4 — Direct Taxes And The Sixteenth Amendment

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Article I, Section 9, Clause 4:

No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.

In 1895, the Supreme Court expanded its interpretation of the meaning of direct taxes in its two decisions in Pollock v. Farmers’ Loan & Trust Co.,[1](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn1art1 " 158 U.S. 601 (1895) [hereinafter Pollock II]; 157 U.S. 429 [hereinafter Pollock I]. Pollock came to the Court twice. In Pollock I, the Court invalidated the tax at issue insofar as it was a tax upon income derived from real property, but the Court was equally divided on whether income derived from personal property was a direct tax. 157 U.S. at 583, 586. In Pollock II, on petitions for rehearing, the Court held that a tax on income derived from personal property was also a direct tax. 158 U.S. at 637. For simplicity, this essay refers to the two decisions collectively as the “Pollock” decision. ") holding that taxes on real and personal property, and income derived from them, were direct taxes.[2](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn2art1 " Pollock II, 158 U.S. 601; Pollock I, 157 U.S. 429. ") These decisions significantly altered the Court’s direct tax jurisprudence. Considering whether an 1894 act that imposed unapportioned taxes on income derived from both real and personal property were direct taxes,[3](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn3art1 " Pollock II, 158 U.S. at 618; Pollock I, 157 U.S. at 558; see Act of Aug. 27, 1894, ch. 349, 28 Stat. 509. ") the Court adopted two primary holdings on the scope of the Constitution’s “direct tax” clause. First, the Court held that taxes on real estate and personal property are direct taxes.[4](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn4art1 " Pollock II, 158 U.S. at 628; Pollock I, 157 U.S. at 580–81. ") Second, the Court held that a tax on income derived from real or personal property—as opposed to income derived from employment or some other source[5](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn5art1 " The Court stated that its holding did not extend to income or other gains derived from “business, privileges, or employments.” Pollock II, 158 U.S. at 635. ") —is, in effect, a tax imposed directly on the property itself and is also a direct tax.[6](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn6art1 " Pollock I, 157 U.S. at 581 ( “An annual tax upon the annual value or annual user of real estate appears to us the same in substance as an annual tax on the real estate, which would be paid out of the rent or income.” ); Pollock II, 158 U.S. at 628 (applying “the same reasoning . . . to capital in personalty held for the purpose of income, or ordinarily yielding income, and to the income therefrom” ). ") Applying these holdings, the Court held that the provisions before it were unconstitutional because they were unapportioned taxes on income derived from real and personal property.[7](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn7art1 " Pollock II, 158 U.S. at 637; Pollock I, 157 U.S. at 583. ")

The Pollock Court concluded that its holding did not conflict with the Court’s prior decisions interpreting the direct tax language.[8](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn8art1 " Pollock II, 158 U.S. at 626–27; Pollock I, 157 U.S. at 574–80. ") The Court reasoned that each of those decisions had sustained unapportioned taxes as either “excises” or “duties” imposed on a particular use of, or privilege associated with, the property in question, not as a tax on the property itself.[9](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn9art1 " Pollock II, 158 U.S. at 626–27; Pollock I, 157 U.S. at 574–80. ") As to Hylton specifically, the Court determined that it had upheld the unapportioned carriage tax as an “excise” on the “expense” or “consumption” of carriages, rather than as a tax on carriage ownership.[10](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn10art1 " Pollock II, 158 U.S. at 627 ( “What was decided in the Hylton Case was, then, that a tax on carriages was an excise, and therefore an indirect tax.” ). ")

After the Pollock decision, taxpayers challenged numerous taxes that Congress had treated as excises subject to the rule of uniformity as unconstitutional direct taxes. The Court, however, distinguished taxes levied “because of ownership” or “upon property as such” from those laid upon “privileges.” [11](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn11art1 " Stanton v. Baltic Mining Co., 240 U.S. 103 (1916); Knowlton v. Moore, 178 U.S. 41, 80 (1900). ") The Court sustained as “excises” a tax on sales of business exchanges,[12](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn12art1 " Nicol v. Ames, 173 U.S. 509 (1899). ") a succession tax construed to fall on the recipients of the property transmitted rather than on the estate of the decedent,[13](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn13art1 " Knowlton, 178 U.S. at 41. ") and a tax on manufactured tobacco in the hands of a dealer, after an excise tax had been paid by the manufacturer.[14](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn14art1 " Patton v. Brady, 184 U.S. 608 (1902). ") In Thomas v. United States,[15](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn15art1 " 192 U.S. 363 (1904). ") the Court sustained a stamp tax on sales of stock certificates based on the definition of “duties, imposts and excises.” [16](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn16art1 " Id. at 369. ") The Court explained that these terms “were used comprehensively to cover customers and excise duties imposed on importation, consumption, manufacture and sale of certain commodities, privileges, particular business transactions, vocations, occupations and the like.” [17](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn17art1 " Id. at 370. ") On the same day, the Court ruled in Spreckels Sugar Refining Co. v. McClain[18](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn18art1 " 192 U.S. 397 (1904) ") that an exaction on the business of refining sugar and measured by gross receipts was an excise and properly levied under the rule of uniformity. Likewise, in Flint v. Stone Tracy Co.,[19](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn19art1 " 220 U.S. 107 (1911). ") the Court held a tax on a corporation that was measured by income, including investment income, to be a tax on the privilege of doing business as a corporation rather than an income tax. Similarly, in Stanton v. Baltic Mining Co.[20](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn20art1 " 240 U.S. 103 (1916). ") , the Court held a tax on the annual production of mines “is not a tax upon property as such because of its ownership, but a true excise levied on the results of the business of carrying on mining operations.” [21](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn21art1 " Stanton, 240 U.S. at 114 (citing Stratton’s Independence v. Howbert, 231 U.S. 399 (1913)). ")

Pollock's holding and rationale were further limited in several respects.[22](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn22art1 " Erik M. Jensen, The Taxing Power, the Sixteenth Amendment, and the Meaning of “Incomes,” 33 Ariz. St. L.J. 1057, 1073 (2001). ") Most prominently, Congress passed and the states ratified the Sixteenth Amendment in 1913 in direct response to Pollock's prohibition on the unapportioned taxation of income derived from real or personal property.[23](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn23art1 " Id.; Boris I. Bittker, Constitutional Limits on the Taxing Power of the Federal Government, 41 Tax Law. 3 (1987). ") The Sixteenth Amendment authorized Congress “to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states.” [24](https://www.law.cornell.edu/constitution-conan/article-1/section-9/clause-4/direct-taxes-and-the-sixteenth-amendment#fn24art1 "<spa