At History News Network, Ray Raphael: A Wealth Tax? Two Framers Weigh In. From the introduction:
Wealth taxes are on the current political table and hotly debated. All taxation was on the framers’ table as they considered a new constitution. What would they make of the measures we are considering now? And more to the point: does the Constitution they drafted allow Congress to tax a person’s overall wealth?
The short answer: yes and no. The longer answer requires historical context.
In the six months preceding the Federal Convention of 1787, Congress received from the separate states, which alone possessed powers of taxation, a grand total of $663—hardly enough to run the nation. Little wonder that the framers’ proposal, what is now our Constitution, granted Congress sweeping authority to levy taxes: “The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises …”
Although taxing authority was broad, the framers delineated only five specific types, each with a qualification:
“Duties, Imposts, and Excises shall be uniform throughout the United States.”
“No Capitation, or other direct, Tax shall be laid, unless in proportion to the Census or enumeration.”
“No Tax or Duty shall be laid on any Articles exported from any State.”
Presumably any taxes not mentioned would have to meet qualifications as well. The underlying principle was fairness, but mechanisms to achieve that goal differed. Exports were ruled out so Congress wouldn’t handicap Virginia, for instance, by taxing tobacco. Most other taxes would be uniform. Direct taxes, on the other hand, had to be apportioned according to state populations.
But what, exactly, was a direct tax? And how might that differ from its opposite, an indirect tax, a term that does not appear in the Constitution?
That’s what Rufus King, delegate from Massachusetts, asked his colleagues at the end of the day on August 20, 1787, after some twelve weeks of deliberations. From James Madison’s Notes of Debates: “Mr. KING asked what was the precise meaning of direct taxation. No one answered.” We have no indication that the framers ever defined direct and indirect taxation, either then or at any other time during their proceedings.
Fast forward to the mid-1790s, when two former delegates weighed in. Alexander Hamilton, while Secretary of the Treasury, recommended a federal tax on carriages, an item that only rich people could afford. Congress levied that tax, but Daniel Hylton, a carriage owner, challenged the measure on constitutional grounds. It was a direct tax, he argued, and Congress had failed to apportion it amongst the states. The case found its way to the Supreme Court. There, Associate Justice William Paterson, who had introduced the New Jersey plan at the Federal Convention, offered a coherent explanation of the framers’ treatment of taxation …
(Via Paul Caron at TaxProf Blog, linking to an excerpted version in Time magazine: What Alexander Hamilton Would Have Thought About a Wealth Tax.)
Posted at 6:11 AM