CITES BY TOPIC:  indirect tax

Pacific Insurance Co. v. Soule, 74 U.S. 433 (1868)

The ordinary test of the difference between direct and indirect taxes, is whether the tax falls ultimately on the tax-payer, or whether, through the tax-payer, it falls ultimately on the consumer. If it falls ultimately on the tax-payer, then it is direct in its nature, as in the case of poll taxes and land taxes. If, on the contrary, it falls ultimately on the consumer, then it is an indirect tax.

Such is the test, as laid down by all writers on the subject. Adam Smith, who was the great and universally received authority on political economy, in the day when the Federal Constitution was framed, sets forth a tax on a person's revenue to be a direct tax. 5 Mill,6 Say,7 J. R. McCulloch,8 Lieber,9 among political economists, do the same in specific [74 U.S. 433, 438] language. Mr. Justice Bouvier, in his learned Law Dictionary, defines a capitation tax, 'A poll tax; an imposition which is yearly laid on each person according to his estate and ability.'

Indeed, it is obvious that an income tax, levied on the profits of any business, does not fall ultimately on the consumer or patron of that business, in any other sense than that in which a poll tax or land tax may be said ultimately to fall, or be charged over by the payer of those taxes upon the persons with whom and for whom they do business, or to whom they rent their lands. The refinement which would argue otherwise, abolishes the whole distinction, and under it all taxes may be regarded as direct or indirect, at pleasure.

But, if the distinction is recognized (and it must be, for the Constitution makes it), then it follows, that an income tax is, and always heretofore has been, regarded as being a direct tax, as much so as a poll tax or as a land tax. If it be a direct tax, then the Constitution is imperative that it shall be apportioned.

If it be argued that an income tax cannot be apportioned, then, it cannot be levied; for only such direct taxes can be levied as can be apportioned.

But an income tax can be apportioned as easily as any other direct tax; first, by determining the amount to be raised from incomes throughout the United States, and then by ascertaining the proportion to be paid by the people of each State. An income tax, in the matter of its apportionment, is not embarrassed by any other difficulties than those which grow out of apportionment, in the admitted cases of poll taxes and land taxes.”

[Pacific Insurance Co. v. Soule, 74 U.S. 433 (1868)]


Knowlton v. Moore (178 U.S. 41), 1900:

“Direct taxes bear immediately upon persons, upon the possession and enjoyment of rights; indirect taxes are levied upon the happening of an event as an exchange.”

[Knowlton v. Moore (178 U.S. 41), 1900]


Stanton v. Baltic Mining (240 U.S. 103), 1916:

"..by the previous ruling it was settled that the provisions of the Sixteenth Amendment conferred no new power of taxation but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged and being placed in the category of direct taxation subject to apportionment by a consideration of the sources from which the income was derived, that is by testing the tax not by what it was -- a tax on income, but by a mistaken theory deduced from the origin or source of the income taxed. "

[Stanton v. Baltic Mining (240 U.S. 103), 1916]