Taxes Permitted

Kinds of Taxes Permitted

By the terms of the Constitution, the power of Congress to levy taxes is subject to but one exception and two qualifications. Articles exported from any State may not be taxed at all. Direct taxes must be levied by the rule of apportionment and indirect taxes by the rule of uniformity. The Court has emphasized the sweeping character of this power by saying from time to time that it “reaches every subject,” 1 that it is “exhaustive” 2 or that it “embraces every conceivable power of taxation.” 3 Despite these generalizations, the power has been at times substantially curtailed by judicial decision with respect to the subject matter of taxation, the manner in which taxes are imposed, and the objects for which they may be levied.

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References

This text about Taxes Permitted is based on “The Constitution of the United States of America: Analysis and Interpretation”, published by the U.S. Government Printing Office.

[Footnote 1] License Tax Cases, 72 U.S. (5 Wall.) 462, 471 (1867).

[Footnote 2] Brushaber v. Union Pac. R.R., 240 U.S. 1 (1916).

[Footnote 3] 240 U.S. at 12.

Tables of Contents

• Taxes Permitted and other Topics in the Contents – Article 1 of the U.S. Constitution
• U.S. Constitutional Law Category
• List of amendments to the U.S. Constitution
• Taxes Permitted and other Topics in the Constitution Contents
• Interpretation of the U.S. Constitution (Table of Contents)
• Clauses of the Constitution (Table of Contents)

Decline of the Forbidden Subject Matter Test

The Supreme Court has restored to Congress the power to tax most of the subject matter which had previously been withdrawn from its reach by judicial decision. The holding of Evans v. Gore 4 and Miles v. Graham5 that the inclusion of the salaries received by federal judges in measuring the liability for a nondiscriminatory income tax violated the constitutional mandate that the compensation of such judges should not be diminished during their continuance in office was repudiated in O'Malley v. Woodrough.6 The specific ruling of Collector v. Day 7 that the salary of a state officer is immune to federal income taxation also has been overruled.8 But the principle underlying that decision&emdash;that Congress may not lay a tax that would impair the sovereignty of the states&emdash;is still recognized as retaining some vitality.9

Resources

References

This text about Taxes Permitted is based on “The Constitution of the United States of America: Analysis and Interpretation”, published by the U.S. Government Printing Office.

[Footnote 4] 253 U.S. 245 (1920).

[Footnote 5] 268 U.S. 501 (1925).

[Footnote 6] 307 U.S. 277 (1939).

[Footnote 7] 78 U.S. (11 Wall.) 113 (1871).

[Footnote 8] Graves v. New York ex rel. O'Keefe, 306 U.S. 466 (1939). Collector v. Day was decided in 1871 while the country was still in the throes of Reconstruction. As noted by Chief Justice Stone in a footnote to his opinion in Helvering v. Gerhardt, 304 U.S. 405, 414 n.4 (1938), the Court had not determined how far the Civil War Amendments had broadened the federal power at the expense of the states, but the fact that the taxing power had recently been used with destructive effect upon notes issued by the state banks, Veazie Bank v. Fenno, 75 U.S. (8 Wall.) 533 (1869), suggested the possibility of similar attacks upon the existence of the states themselves. Two years later, the Court took the logical step of holding that the federal income tax could not be imposed on income received by a municipal corporation from its investments. United States v. Railroad Co., 84 U.S. (17 Wall.) 322 (1873). A farreaching extension of private immunity was granted in Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429 (1895), where interest received by a private investor on state or municipal bonds was held to be exempt from federal taxation. (Though relegated to virtual desuetude, Pollock was not expressly overruled until South Carolina v. Baker, 485 U.S. 505 (1988)). As the apprehension of this era subsided, the doctrine of these cases was pushed into the background. It never received the same wide application as did McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819), in curbing the power of the states to tax operations or instrumentalities of the Federal Government. Only once since the turn of the century has the national taxing power been further narrowed in the name of dual federalism. In 1931 the Court held that a federal excise tax was inapplicable to the manufacture and sale to a municipal corporation of equipment for its police force. Indian Motorcycle v. United States, 283 U.S. 570 (1931). Justices Stone and Brandeis dissented from this decision, and it is doubtful whether it would be followed today. Cf. Massachusetts v. United States, 435 U.S. 444 (1978).

[Footnote 9] At least, if the various opinions in New York v. United States, 326 U.S. 572 (1946), retain force, and they may in view of (a later) New York v. United States, 505 U.S. 144 (1992), a Commerce Clause case rather than a tax case.

Tables of Contents

• Taxes Permitted and other Topics in the Contents – Article 1 of the U.S. Constitution
• U.S. Constitutional Law Category
• List of amendments to the U.S. Constitution
• Taxes Permitted and other Topics in the Constitution Contents
• Interpretation of the U.S. Constitution (Table of Contents)
• Clauses of the Constitution (Table of Contents)