In a previous post, I noted the interesting originalist brief by Akhil and Vikram Amar in Moore v. United States, the pending Sixteenth Amendment case. The Amars argue that even if the Sixteenth Amendment does not authorize taxation of unrealized gains as income (the issue in Moore), such a tax is still constitutional because it is not a "direct tax" under Article I. For this they centrally rely on Hylton v. United States, a 1796 case that upheld a tax on carriages and (they say) limited direct taxes to head taxes and real estate taxes.
I think the argument is not as easy as they make it sound. Here is a discussion of Hylton by David Currie (my favorite source for wry post-ratification commentary), in The Constitution in the Supreme Court, the First Hundred Years, p. 33 (footnotes omitted):
All three opinions in Hylton [by Justices Chase, Iredell and Paterson] hazarded the suggestion that only capitation and land taxes were direct, and for this unnecessarily broad conclusion (qualified in Paterson's opinion by additional possibilities) the decision was cited carelessly until 1895. The basis for this conclusion is elusive. Chase stated it without reasons, following perhaps from his discussion of policy. Iredell suggested that land taxes were direct because they could be apportioned fairly. Paterson referred to "theory and practice" without expounding the one or illustrating the other, and he added without citation that the provision had been inserted during the convention to allay Southern fears regarding taxes on land and slaves. But the opinions fall short of convincing the modern reader that contemporary understanding limited the term to land and poll taxes. That the framers may have had land and poll taxes in mind does not prove that no others fall within the general term "direct"…
And from later on (p. 35):
It was Paterson who advanced the most persuasive argument. He, too, concluded that "[a]ll taxes on expenses or consumption are indirect taxes," but he explained why: "Indirect taxes are circuitous modes of reaching the revenue of individuals, who generally live according to their income." For this interpretation he quoted Adam Smith:
The state, not knowing how to tax directly and proportionally the revenue of its subjects, endeavors to tax it indirectly, by taxing their expense, which it is supposed , in most cases, will be nearly in proportion to their revenue… [quoting The Wealth of Nations, published in 1776]
Currie adds in a footnote (note 39 on p. 36): "The notes Hamilton prepared in anticipation of his oral argument suggest that he urged Smith's definition on the Court and that he reconciled it with the understanding that land as well as capitation taxes were direct by invoking Smith's own insistence that land and labor were the sources of income."
I haven't looked at all the primary sources but this seems to suggest (pretty strongly, I'd say) that an income tax is a direct tax while taxes on expenditures (such as on carriages) are indirect. In any event, the issue seems more puzzling than the Amars admit.
Mike Rappaport adds: Some years ago, I had the opportunity to review and write about Hylton in this article. I remember the performance of the justices to be extremely disappointing — not for the result, but for the unbelievably poor legal analysis.
Posted at 6:06 AM