My earlier entry provided links to Founding-era sources showing that the Constitution’s category of “direct taxes” included levies on all kinds of wealth and on business profits and income. Direct taxes were not, as often claimed, limited to capitations and real property levies. Nor were they limited to taxes on “persons and property,” as stated in the Supreme Court’s opinion last month in Moore v. United States.
This post supplements the earlier entry. Below you will find (1) citations to the four ratification-era comments mentioned in the earlier entry, (2) several additional ratification-era comments, with citations, and (3) links to more pre-Founding-era and Founding-era direct tax statutes.
If you manage to get to the end of this post, I think you will agree: In light of the evidence, it is astounding that confusion over the Constitution’s categories of direct and indirect taxes still persists.
Four Ratification-Era Remarks
The previous essay listed four comments by participants in the 1787-90 constitutional debates showing that direct taxes included levies on personal property, business profits, and income. I’ll provide the citations here, so you can examine them for yourself. They are in the form “14 DH 424.” This means “Volume 14 of the Documentary History of the Ratification of the Constitution, page 424.” An electronic version of the Documentary History is available at this link.
The comment by John Marshall at the Virginia ratifying convention stating that the contours of direct taxes were “well understood” and listing some covered items of personalty is at 9 DH 1122-23. The comment from the “Address and Reasons of Dissent of the Minority of the Convention of the State of Pennsylvania” (listing land, cattle, trades and occupations) is at 2 DH 636. The pertinent discussion by Oliver Ellsworth (including business tools and family utensils within the scope of direct taxes) is found at 3 DH 549. The description of direct taxes by the “Federal Farmer” (including “labour, &c.”) is located at 17 DH 294.
More Ratification-Era Remarks
Patrick Henry at the Virginia ratifying convention identified the subjects of direct taxes as “lands, tenements, and other property” (emphasis added). 10 DH 1464. The Virginia writer known as “A Freeholder” distinguished direct taxes from duties and listed among the subjects of direct taxation “doctors, lawyers, clerks, wheel carriages, and on lots in town.” 9 DH 724. As mentioned in the July 12 post, the reference to “doctors, lawyers, clerks” refers to direct “faculty taxes,” usually tied to income.
The New York Antifederalist “Brutus” listed as objects of direct taxation polls, land, houses, buildings, windows, fireplaces, cattle and “all kinds of personal property.” 14 DH 424.
In Maryland, William Paca proposed an amendment to the Constitution specifying that “Congress shall not impose direct taxes on land or other property.” 17 DH 241.
At the first North Carolina ratifying convention on July 26, 1788, Samuel Spencer asked “How are direct taxes to be laid? By a poll-tax, assessments on land or other property?” 30 DH 296.
It appears that James Madison believed even postal charges were form of direct tax. See The Federalist No. 39, 15 DH 403, 406. I think, however, that most people would have considered them a species of indirect tax (“duty”).
There are other examples from the ratification record, but those should be sufficient: Americans understood that direct taxes comprehended far more than capitations and land levies.
18th Century Direct Tax Statutes
The earlier post provided links to 18th century direct tax statutes from Great Britain (1713), Massachusetts (1780), Connecticut (1777), New Hampshire (1788), and South Carolina (1788). The South Carolina statute taxed realty and some items of personalty. The others included realty and personalty, but added various combinations of business profits and income.
Now let’s examine the prototype British direct tax law and four additional American statutes.
The Granddaddy of them All
The prototype for American direct tax statutes was the British Parliament’s misnamed “Land Tax,” first enacted in 1692. It was misnamed because it covered far more than land. A copy of the 1692 Land Tax Law, found in the British Statute at Large, is at this link.
Notice that the subjects of the tax included all items of personal property other than those excepted. They also encompassed income from many different sources, including but not limited to, public offices, mines, iron works, and parks. I was surprised to see that the text of the statute listed these items even before addressing the taxation of land.
The Land Tax Law was amended from time to time. Here is how Ephraim Chambers’ Cyclopaedia described its configuration in 1778:
“. . . from the year 1693 to the present, the land-tax has continued an annual charge upon the subject . . . The method of raising it is by charging a particular sum upon each county, according to the valuation of 1692; and this sum is assessed and raised upon the personal as well as the real estates of individuals . . . the assessment on personal estates shall be 4 s. [i.e., four shillings] in the pound, according to the true yearly value of them; i.e., for every 100l. [i.e., £100] of ready money and debts, and for every 100l. worth of goods, 20 s. . . . and excepting stock upon lands and household stuff, and debts and loans owing to his majesty. Every person having a public office or employment, and their substitutes, shall pay 4 s. for every 20 s. of their salaries . . . Every person having an annuity or pension out of the exchequer, or out of any branch of the revenue shall pay 4 s. for every 20 s. except salaries charged upon lands which pay to the full, and annuities exempted by act of parliament . . . .”
Thus, not merely real estate, but cash, accounts receivable, other personal property, and income were subjects of direct taxation. The provision taxing rental income added a withholding requirement: “The land-tax shall be paid by the tenant, who shall deduct it out of his rent.”
Additional American Direct Tax Statutes
The statement of the Pennsylvania dissenters (mentioned above) as to the scope of direct taxes (“land, cattle, trades, occupations, etc.”) is supported by a 1781 direct tax statute from that state, linked here. Besides assessing a wide range of real and personal property, it included “all offices and posts of profit” and “all professions, trades and occupations.” These categories effectively rendered it an income tax.
When Justice Samuel Chase opined in Hylton v. United States (1796) that direct taxes included only levies on heads and land, he should have known better. Although his home state of Maryland had relied mostly on capitations during the colonial era, after Independence it moved to direct taxes on property of all descriptions, with specified exceptions. Here is a link to a 1782 Maryland direct tax statute.
It is not clear why Chase was so mistaken. His guarded language (“I am inclined to think, but of this I do not give a judicial opinion”) suggests he was merely guessing. Or his dictum may have been a product of his notorious pro-Federalist partisanship—partisanship that ultimately led to his impeachment, although not removal.
Here is a link to a New York statute passed in 1788 and effective in 1789, which requires Assessors to examine the “Value of the real and personal Estate” of every inhabitant of their district for taxation purposes. Like most other direct tax statutes—and like the Constitution itself—it provides for apportionment of revenue among political subdivisions.
Parting Comments
First: A point of vocabulary. As observed in my 2015 article on the subject, Americans used the term “duty” to mean any exaction other than a direct tax. The British usage of the word was broader, and could include direct taxes.
Second: In Hylton, Justice Chase suggested that capitations were imposed equally on all persons. In NFIB v. Sebelius (the 2012 case upholding the Affordable Care Act’s health insurance mandate), the court was misled by Chase’s comment. In writing for the Court, Chief Justice John Roberts stated:
“Capitations are taxes paid by every person, ‘without regard to property, profession, or any other circumstance.’ Hylton, supra, at 175 (opinion of Chase, J.) (emphasis altered).”
My earlier post corrected the misconception. In fact, capitations frequently were adjusted for wealth, status, sex, and other factors. Linked here is a 1733 Delaware capitation law providing for such adjustment.
Like Maryland, after Independence Delaware moved away from capitations toward direct taxes on property. Delaware’s 1796 tax overhaul measure is linked here.
A version of this essay appeared at Volokh.com on July 19, 2024
