A critical characteristic of any direct tax is accurately identified in the Constitution of September 17, 1787, at 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 requirement that a direct tax be in proportion to the federal census is confirmed by an act of Congress. The United States Treasury Department in its 1948 publication, “WORK AND JURISDICTION OF THE BUREAU OF INTERNAL REVENUE,” described the first federal direct tax on page 13:
“This brings us to the first direct tax laid by the Federal Government. Preliminary thereto was the Act of July 9, 1798 (1 Stat., 580) , providing for the valuation of lands and dwelling houses, and the enumeration of slaves.”
“A direct tax within the United States of two millions of dollars was laid by the Act of July 14, 1798 (1 Stat., 597). The tax was apportioned to the States in specified amounts. By section 2 the said tax shall be collected by “the supervisors, inspectors, and collectors of the internal revenue of the United States, under the direction of the Secretary of the Treasury, and pursuant to such regulations as he shall establish.” It was assessed upon dwelling houses, lands, and slaves according to the valuations and enumerations to be made under the Act of July 9, 1798, above mentioned. The assessments were made by the supervisors of the several districts, pursuant to instructions from the Secretary, which instructions the Secretary was required to issue to each supervisor so soon as the valuations and enumerations were completed in the State to which the supervisor belongs.”
The first direct tax as well as all federal internal taxes were repealed after June 30, 1802, by “An Act to repeal Internal Taxes,” approved April 6, 1802 (2 Stat., 148).
A second direct tax law apportioning the amount of the $3,000,000 tax among the States and its counties was enacted on August 2, 1802 (3 Stat., 53). Both the first and the second direct tax stipulated the specific amount of money that was to be collected by apportionment within the United States. Every federal direct tax has consisted of a definite amount to be collected by apportionment to identifiable property located within the United States. Any claimed federal direct tax that lacked a definite amount to be collected, property subject to lawful apportionment failed as legitimate taxes.
The following Internet definitions of direct taxation or tax show how misunderstood direct taxation and direct taxes have become:
“Direct taxes are one type of taxes an individual pays that are paid straight or directly to the government, such as income tax, poll tax, land tax, and personal property tax. Such direct taxes are computed based on the ability of the taxpayer to pay, which means that the higher their capability of paying is, the higher their taxes are. ” https://corporatefinanceinstitute.com/resources/knowledge/other/direct-taxes/
“A direct tax is paid directly by an individual or organization to the imposing entity. A taxpayer, for example, pays direct taxes to the government for different purposes, including real property tax, personal property tax, income tax, or taxes on assets.” https://www.investopedia.com/terms/d/directtax.asp
“A government levy on the income, property, or wealth of people or companies. A direct tax is borne entirely by the entity that pays it, and cannot be passed on to another entity.
Examples include corporation tax, income tax, and social security contributions. Unlike consumption taxes (see indirect tax), direct taxes are based on the ability to pay principle but they sometimes work as a disincentive to work harder and earn more because that would turned mean paying more tax.”
https://www.businessdictionary.com/definition/direct-tax .
Sixteenth Amendment
“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”
The ultimate misconception of the federal direct tax is the Sixteenth Amendment interpretation that the Sixteenth Amendment permits the Congress to enact a direct income tax without apportionment and without regard to any census or enumeration. The claim is specifically made by the IRS that the amendment gives the Congress the power to lay and collect taxes on incomes from whatever source derived without apportionment and without regard to any census or enumeration. The claim that the Sixteenth Amendment permits a direct tax on all the incomes earned within the United States is based on an impermissible alteration of the punctuation of the original Sixteenth Amendment. There is a “comma” between the phrase “on incomes” and the phrase “from whatever source derived” which makes the power of Congress to lay and collect taxes on incomes” dependent on whatever source of taxing power that is not subject to “apportionment among the several States and without regard to any census or enumeration.” Simply stated, the Congress has whatever power to lay and collect indirect taxes on incomes it had before the Sixteenth Amendment and no greater power to lay and collect direct taxes after the Sixteenth Amendment.
The Next Post
The real source of the power of the Congress to lay and collect taxes on incomes will be the subject of the next Post. You’re reminded that my $50 offer is still available. Refer to my previous post for details.