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.

The Supreme Court first interpreted the Constitution’s “direct tax” language shortly after the Nation’s founding in Hylton v. United States.1 Hylton presented the question of whether an unapportioned tax on carriages was a “direct tax,” and therefore unconstitutional.2 In three separate opinions, the deciding justices3 each held that the tax was not “direct” within the meaning of the Constitution and suggested that the term “direct taxes” applied only to a narrow class of taxes that includes (1) capitation taxes4 and (2) taxes on “land.” 5

In Hylton, the Supreme Court adopted a functional approach to determine whether a tax is direct, focusing on whether the tax at issue can be apportioned and, if so, whether apportionment would produce significant inequities among taxpayers.6 As Justice Samuel Chase stated in his opinion, “If [a tax] is proposed to tax any specific article by the rule of apportionment, and it would evidently create great inequality and injustice, it is unreasonable to say, that the Constitution intended such tax should be laid by that rule.” 7 As the Court recently explained its holding in Hylton, the “Court upheld the tax, in part reasoning that apportioning such a tax would make little sense, because it would have required taxing carriage owners at dramatically different rates depending on how many carriages were in their home State.” 8 The Court in Hylton did not, however, offer a comprehensive definition of the types of taxes that are “direct.” 9

The result of Hylton was not challenged until after the Civil War. A number of taxes imposed to meet the demands of that war were challenged as direct taxes. The Supreme Court, however, sustained successively as “excises” or “duties,” a tax on an insurance company’s receipts for premiums and assessments,10 a tax on the circulating notes of state banks,11 an inheritance tax on real estate,12 and a general tax on incomes.13 In the last case, Springer v. United States, the Court noted that it regarded the term “direct taxes” as meaning capitation taxes and taxes on land.14 The Court stated: “Our conclusions are, that direct taxes, within the meaning of the Constitution, are only capitation taxes, as expressed in that instrument, and taxes on real estate, and that the tax of which the plaintiff in error complains is within the category of an excise or duty.” 15

Footnotes

1

Hylton, 3 U.S. 171.

2

Id. at 172. The tax at issue in Hylton imposed a specific yearly sum on carriages. Act of June 5, 1794, ch. 45, 1 Stat. 373, 374 (1794). The amount varied between one and ten dollars, depending on the type of carriage. Id. The tax exempted carriages used in husbandry or for the transportation of goods, wares, merchandise, produce, or commodities. Id.

3

Only four of the six Justices who comprised the Supreme Court at the time participated in the Hylton argument—Associate Justices Samuel Chase, William Paterson, James Iredell, and James Wilson. Consistent with the Court’s practice during that period, Justices Chase, Paterson, and Iredell each wrote a separate, or “seriatim,” opinion holding the tax to be constitutional. See Hylton, 3 U.S. at 172–83; M. Todd Henderson, From Seriatim to Consensus and Back Again: A Theory of Dissent, 2007 Sup. Ct. Rev. 283, 303–11 (2007). Justice Wilson abstained from voting on the case because he had previously expressed an opinion on the issue while serving as a circuit court judge and because the unanimity of the remaining three participating Justices made his opinion unnecessary. See Hylton, 3 U.S. at 183–84.

4

See Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519, 571 (2012) [hereinafter NFIB] (citing Hylton, 3 U.S. at 175 (opinion of Chase, J.)).

5

Hylton, 3 U.S. at 174–75 (opinion of Chase, J.); Id. at 176–77 (opinion of Paterson, J.); Id. at 183 (opinion of Iredell, J.).

6

Id. at 174 (opinion of Chase, J.); Id. at 179–80 (opinion of Paterson, J.); Id. at 181–83 (opinion of Iredell, J.).

7

Id.

8

NFIB, 567 U.S. at 570; see Hylton, 3 U.S. at 179 (opinion of Paterson, J.) ( “A tax on carriages, if apportioned, would be oppressive and pernicious. How would it work? In some states there are many carriages, and in others but few. Shall the whole sum fall on one or two individuals in a state, who may happen to own and possess carriages? The thing would be absurd, and inequitable.” ).

9

Contra Springer v. United States, 102 U.S. 586, 602 (1880) ( “Our conclusions are, that direct taxes, within the meaning of the Constitution, are only capitation taxes, as expressed in that instrument, and taxes on real estate.” (emphasis added)); but see Pollock v. Farmers’ Loan & Trust Co., 157 U.S. 429 (1895) (holding taxes on personal property are also direct taxes).

10

Pacific Ins. Co. v. Soule, 74 U.S. (7 Wall.) 433 (1869).

11

Veazie Bank v. Fenno, 75 U.S. (8 Wall.) 533 (1869).

12

Scholey v. Rew, 90 U.S. (23 Wall.) 331 (1875).

13

Springer v. United States, 102 U.S. 586 (1881).

14

Id. at 602.

15

Id. (emphasis retained).