I have been struggling to make sense of the Constitution’s requirement that “direct taxes” must be apportioned among the states according to the last federal census. First of all, what even are direct taxes? The Constitution doesn’t say and the Supreme Court has waffled over the years on exactly what that term encompasses. And whatever direct taxes are, why in the world would the Constitution want them assigned based on state population, a requirement that would make nearly any such tax practically and politically impossible to implement?
The original meaning of direct taxes
An ominous clue regarding the mystery of the direct taxation requirement is its location in the Constitution: article I, section 9, in clause 4, otherwise known as the Three-Fifths Clause. Modern readers will be most familiar with the Three-Fifths Clause in its application to representation in the House of Representatives. Before the Reconstruction Amendments ended slavery, the number of representatives from each state in the House was based on their respective populations, excluding Indians not taxed and counting unfree persons as three-fifths of one person.
The Three-Fifths Clause was the result of a compromise at the Constitutional Convention between delegates of the (mostly) free states and the slave states. Delegates of the southern slave states wanted to have their cake and eat it too by counting the enslaved as “persons” for purposes of determining representation in the House while treating them as chattels (things) for all other purposes.
Northern state delegates objected and argued enslaved persons should not count at all. Whether slaves were counted would determine which states might predominate in the House, because northern states like Pennsylvania and Massachusetts had larger free populations than southern states like Maryland and South Carolina, but counting slaves could more than even the scales.1 The Three-Fifths Clause was the compromise the constitutional delegates landed on.
But the original Constitution says that “direct taxes” as well as representation in the House must be apportioned among the states based on population, counting the unfree as three-fifths of full persons. Professor Ackerman argues that the constitutional delegates tied these two provisions together on the theory that if slave states were to enjoy a three-fifths slave bonus in representation, they should also have to pay a concomitant three-fifths slave penalty come tax time.
At the same time, though, the delegates did not want to hobble the new government’s general taxing power by subjecting it to apportionment, so they limited the taxes in question to “direct” taxes. But what did that mean? According to the minutes of the Constitutional Convention:
Mr King asked what was the precise meaning of direct taxation? No one answd.
Great. The Constitution’s second mention of direct taxes gives a further clue, however. Article I, sec. 9 prohibits the taxation of “capitations, or other direct, taxes” except in proportion to state population. The Amar brothers explain how the explicit delineation of head taxes as direct was yet another sop to the slave power:
Because a capitation tax was a direct tax subject to apportionment, Congress could not tax slave property—and thus effectively move the country towards abolition—simply by taxing all slave ownership uniformly. The heads of slaves could not be taxed in the same way as heads of cattle or heads of lettuce (the latter two of which would simply be subject to the requirement of uniformity). A tax on slave property would have to raise as much money from abolitionist Massachusetts as it did from slave- dense Virginia (accounting for different size in the two states’ House delegations), making a tax on slavery completely impossible.
And what “other” direct taxes might there be? Professor Ackerman suggests two. One is taxes on real property. In fact, he explains, the very term “direct” taxation originally derived from a misconceived French theory of political economy premised on the idea that all wealth in the economy arises exclusively from agriculture, with everybody but farmers being essentially parasites. According to this theory, taxes on agricultural land directly tax the only source of wealth and taxes on other stuff do so indirectly.
Secondly, he argues, some delegates at the convention may have intended the apportionment requirement for direct taxes to protect their states from having to pay accrued back taxes owed to Congress under the Articles of Confederation. If they were direct in nature, those outstanding taxes would have to be divvied up among the states based on relative populations. Bully for Delaware, with its small population and large outstanding tax liability.
Hylton v. U.S. and wealth taxes
The question of direct taxation came before the Supreme Court very early on in 1796, in the court’s most important pre-Marbury decision, Hylton v. U.S. In order to help fund the new government, and in particular to raise revenues in anticipation of renewed hostilities with Great Britain, Congress enacted a tax in 1794 on carriages. As the Amar brothers describe it, the carriage tax was a kind of wealth tax:
This was a luxury tax upon the sort of high-status conveyances favored and flaunted by wealthy and genteel folk; the statute explicitly exempted from the duty ‘any carriage usually and chiefly employed in husbandry, or for transporting or carrying of goods, wares, merchandise, produce or commodities.’
When Hylton challenged the law as an unapportioned direct tax, Alexander Hamilton returned from private practice to defend the tax, which had been his brainchild, on behalf of the fledgling federal government in the only case he ever argued before the Supreme Court. He told the justices that
no construction ought to prevail calculated to defeat the express and necessary authority of the government. It would be contrary to reason, and to every rule of sound construction, to adopt a principle for regulating the exercise of a clear constitutional power which would defeat the exercise of the power.
The Supreme Court unanimously agreed with Hamilton. Justice Chase argued that the “direct taxes contemplated by the Constitution, are only two, to wit, a capitation . . . and a tax on LAND.” Justice Paterson, who like Hamilton had been a delegate at the Constitutional Convention, agreed and in the process introduced a rule of interpretation to handle those rank provisions of the Constitution reflecting the uneasy compromise with slaveholders:
The rule of apportionment is . . . radically wrong; it cannot be supported by any solid reasoning. Why should slaves, who are a species of property, be represented more than any other property? The rule, therefore, ought not to be extended by construction.
As Justice Paterson acknowledged in that passage, you can’t make sense of the parts of the Constitution based on slavery, because they don’t make sense. They reflect the practical compromises the founders made with the monsters amongst themselves in order form the Union. It was a deal with the devil that bedevils us to this day.
But we would heap folly upon sin to try and derive from the slavery provisions any sound principles or rules of constitutional interpretation going forward. Instead, the slavery provisions should be quarantined as limited anachronisms, later repudiated by the Reconstruction Amendments. They are “not to be extended by construction.”
The Supreme Court made exactly that mistake a century later in Pollock, when it broke faith with Hylton and extended the application of direct taxes to income derived from personal property. As I described last time, they were decisively repudiated by the People in the Sixteenth Amendment. The Gilded Era justices would have been better served to have followed Justice Paterson’s rule of constitutional interpretation.
The Constitution and the peculiar institution
The Constitution never mentions the word “slavery.” Yet the compromise with that hideous evil infused and corrupted our founding document. Slavery stalks like a dark horse through the text and rears its ugly head in the most unforeseen and seemingly anodine places: congressional representation, the electoral college, direct taxes, immigration.
But the Constitution is not an unredeemable project. On the contrary, it’s a work in progress that has steadily if unevenly sought over the past two and a half centuries to make right its original sin. Through amendments, we are making amends, as Professor Akhil Amar likes to say. And in the process, we return to the Constitution’s truest original aspiration, to form a more perfect Union.