| PRINCIPLES OF TAXATION. |
By DAVID A. WELLS, LL. D., D. C. L.,
CORRESPONDANT DE L'INSTITUT DE FRANCE, ETC.
IX.—NOMENCLATURE AND FORMS OF TAXATION.
(Continued from page 185.)
THE nature and scope of the "legal" and wholly anomalous definition (to which reference has been made, see page 173) that has been given in the United States by its Supreme Court to a direct tax,[1] and the interesting judicial and historical circumstances in connection therewith are substantially as follows:
The Constitution of the United States provides that "representatives and direct taxes shall be apportioned among the several States according to their respective numbers"—that is, population—"and excluding Indians not taxed." The origin of the idea thus incorporated in the Constitution of proportioning direct taxes according to representation, or population, rather than upon property, is not certainly known, and has been made the subject of speculation. Hamilton, subsequent to the adoption of the Constitution, suggested that the writings of the French economists of the eighteenth century, with which a number of the prominent members of the Constitutional Convention were familiar, was its source. These held that "agriculture was the only productive employment, and that the net product from land, to be found in the hands of the landowner, is the only fund from which taxation can draw without impoverishing society." They were accordingly led to class taxes habitually as direct when laid immediately upon the landowner, and as indirect when laid upon somebody else, but in their opinion destined to be borne by the landowner ultimately. Precedents for levying taxes by apportionment were also to be found in the French taille réelle, which was a tax on the income of real property and laid by apportioning a fixed sum among the provinces and requiring from each its quota. The English land tax, established under William III, embodied a like provision.[2]
- ↑ Chief-Justice Chase on more than one occasion judicially intimated that the definition of direct taxes by political economists can not be used satisfactorily for the purpose of construing the phrase in the Constitution of the United States. Thus, a tax on the circulation by banks of State bank notes was held not to be direct (Veazie vs. Fenno, 8 Wallace, 533546), and so also of a tax on incomes of insurance companies (Pacific Insurance Company vs. Soule, 7 Wallace, 433).
- ↑ For further discussion of this subject, see paper by Prof. Charles F. Dunbar, contributed to The Journal of Economics, for July, 1889, and entitled The Direct Tax of 1861.
