Direct Tax Clause

“England may be the mother of Parliament, but from the Boston Tea Party to this administration, it’s the United States that has been the mother of tax revolt.  You know, that’s a pretty good line.  I can hardly wait to try it out on Margaret Thatcher.”

Ronald Reagan, Remarks at a briefing for members of the American Business Conference, The White House, March 23, 1988

“No capitation or other direct tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.”  Article 1, Section 9, Clause 4, US Constitution

This clause is known as the Direct Tax Clause.  It underlines the statement in Article 1, Section 2, Clause 3 (the three-Fifths Clause), which states, “Representatives and direct taxes shall be apportioned among the several states”.

Apportioned means an allotment based on state population.

Enumeration means number of or count of.

One of the intentions of the Writers of the Constitution was to give the federal government the ability to raise money.  This was not a strong point in the Articles of Confederation.

In order to understand direct taxation, it is important to understand indirect taxation.  Indirect taxes are generally taxes on articles of consumption.  (Duties, Imposts, and Excises).  These taxes are considered “safe” for Congress to pass (people wouldn’t get mad and vote them out of office).  The burden was shifted to the consumers.

As Alexander Hamilton, writing as Publius, states in Federalist 21: “

“If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.”

Scholars are divided on the meaning of direct tax.  Basically, direct tax would be a tax among the states based on population.

In debates during the time of the Founding, there were two forms of taxation for which apportionment was intended: capitation and land (included slaves).  Capitation tax is generally known as a “head tax”.  Each person in the country would pay a certain amount.

Through the years, there has been argument in the Courts as to whether direct taxation goes beyond capitation and land taxes.  The general conclusion is that it does not.  If Congress tries to collect direct taxes beyond that point, Congress would be considered to be overreaching.  Direct taxes were to be used in an emergency.  Congress has seldom levied direct taxes.

The issue of direct taxation became less of an issue with the “passage” of the 16^th Amendment.  It states:

“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.”

Sources say this was ratified on February 3, 1913.

With the direct tax clause, we the people allow Congress to pass taxes indirectly –capitation and land.

We the people limit the authority of Congress to pass direct taxes, which could be unfair and/or burdensome.

References:

Findlay, Bruce Allyn and Findlay, Esther Blair.  Your Rugged Constitution.  Stanford: Stanford University Press, 1950

Hannaford, Peter.  The Quotable Ronald Reagan.  Washington, DC: Regnery Press, 1998

http://www.heritage.org/constitution/#!/articles/1/essays/64/direct-taxes

US Constitution

Online dictionaries

The Great Compromise

“Representatives and direct Taxes shall be apportioned among the several States which may be included within the Union, according to their respective Numbers, [which shall be determined by adding to the whole number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three-fifths of all other persons.] The actual Enumeration shall be made within three Years after the first Meeting of the Congress of the United States, and within every subsequent Term of ten Years, in such Manner as they shall by law direct. The Number of Representatives shall not exceed one for every thirty Thousand, but each State shall have at Least one Representative; [and until such enumeration shall be made, the State of New Hampshire shall be entitled to chuse three, Massachusetts eight, Rhode Island and Providence Plantations one, Connecticut five, New-York six, New Jersey four, Pennsylvania eight, Delaware one, Maryland six, Virginia ten, North Carolina five, South Carolina five, and Georgia three.]”

This is Article 1, Section 2, Clause 3 of the US Constitution. The first section in parentheses was deleted by the 14th Amendment. The second section in parentheses was changed following the first US Census. I am showing you the whole section so that we can discuss the history of the Great Compromise and the three-fifths rule as well as the fact that the Constitution allows for amendment (change) when necessary.

During the Constitutional Convention in 1787, the Framers knew that they needed to give more power to the federal government than what had been given to the federal government under the Articles of Confederation. (Please see “What Can We Expect” from Feb 11, 2013 for an explanation of the Articles of Confederation.)

The advocates of doing away the Articles of Confederation and writing a new Constitution presented a plan to the Convention. It was called the Virginia Plan. John Randolph of Virginia presented the Plan. This Plan allowed for an executive, legislative, and judicial branch of government. In addition, it stated that states with larger populations (like Virginia) should have more representatives in Congress than the less-populated states.

Of course, the smaller states objected to allowing the larger states to have more power. New Jersey delegate William Paterson presented the New Jersey Plan. This Plan stated that each state should have the same number of representatives in Congress. This would give each state equal power.

This issue was hotly debated. The Convention was almost adjourned over this point. The only way to save the Convention from failure was compromise.

Roger Sherman of Connecticut suggested that the structure of the Congress should be two houses. One would be the Senate and the other the House of Representatives. In the Senate, each state would have two senators. Population would determine the number of representatives each state had in the House of Representatives.

There was a month of debate in the Convention before the Framers agreed to the Compromise. Historically, this is known as the Great Compromise.

The number of Representatives that each state would have would be determined after the Census was counted. The last part of this clause shows the number of Representatives the states would have until the first Census was completed.

The other very important issue that arose during this discussion of representation was the question of counting the slaves for representation and taxation purposes. The states that practiced slavery (primarily the Southern states) wanted the slaves to be counted as population for representation purposes, but not counted for the purpose of taxation. The Northern states objected.

The Framers worked out the agreement known as the Three Fifths Rule. The Three Fifths Rule was not a new concept to this Convention. This same ratio had been used in 1783 under the Articles of Confederation. The Three Fifths Rule meant that three out of every five slaves would be counted for taxation and representation purposes. An example: If a state had 5000 slaves, only 3000 people would be counted. This whole concept was eliminated with the passage of the 14th Amendment, Section 2.

There was additional discussion and concern about the future of the slave trade. The Northern Delegates discussed abolishing slavery, but agreed to take no action against importing slaves for twenty years. In 1808, twenty years later, Congress did outlaw the importing of enslaved people to the United States. Much discussion has occurred over this gut-wrenching decision made by the Northern delegates. The only thing that I can add is that each man had to live with his conscience on this decision.

The original intent of those at the Convention was that there would be one representative for each 30,000 people. As the population grew, it became evident that the House would become too large to work efficiently. In 1929, a law was passed that limits the number of representatives to 435. The number of representatives per state is adjusted after each census. If a state has a very low population, it is still entitled to one representative.

So, under Article 1, Section 2, Clause 3, you (we the people) allow the Congress to set the formula to distribute membership of the House of Representatives and that a Census may be conducted every 10 years.

The benefit to you (we the people) is that we have a House of Representatives directly elected by us and each state has power in the House of Representatives in proportion to its population.

References:

Farrand, Max. The Framing of the Constitution of the United States. New Haven: Yale University Press, 1913

Findlay, Bruce Allyn and Findlay, Esther Blair. Your Rugged Constitution. Stanford: Stanford University Press, 1950

Foresman, Scott. Social Studies, The United States. Pearson Education, Inc., 2008

US Constitution