Where Is The Wall Of Separation Between Direct And Indirect Taxes?

Donald Drakeman (Notre Dame), Where is the Wall of Separation Between Direct and Indirect Taxes?:

Rob Natelson’s essay, “The Constitutional Line on Direct Taxes,” concludes that the Supreme Court’s decisions involving direct and indirect taxes have been “conflicting, uncertain—and wrong.” Those decisions may have been conflicting and uncertain, but whether they are wrong is a more complicated question.

He urges us to do a deep dive into “eighteenth-century tax vocabulary and … contemporaneous tax laws” to identify a clear and consistent understanding of these terms. Joel Alicea and I did just that a few years ago [The Limits of New Originalism, 15 U. Pa. J. Const. L. 1161 (2013)], and we focused on the carriage tax upheld in the landmark 1796 Hylton case. This was the Court’s first exercise of judicial review, and it is well worth reading, not least because we discovered that “the case was trumped up, the facts were bogus, the procedure was defective, and the Court lacked a quorum.”

We also learned that the framers actually had very different views of the meaning of indirect and direct taxes, especially as related to personal property. That is the main reason why prominent founders came down on opposite sides of the question in Hylton. The issue even split two of the Federalist authors. Alexander Hamilton argued that the carriage tax law was constitutional over Madison’s strenuous objections. ...

Since Prof. Natelson is concerned that too much of the literature on this subject has been “agenda-driven,” please note that I think a wealth tax is a terrible idea, and I am not writing to argue in favor of its constitutionality. But the historical record is both more interesting and more complex than it first appears. If we believe that the original understanding or the framers’ intentions (or both) are important parts of constitutional interpretation, we need to be especially thoughtful about what we really know about that history.

In this case, what we know is that an objective analysis of the meaning of the key terms points in multiple directions. To decide which is the right direction, we need a good reason for choosing one over the other without just favoring our own political preferences. Justice Paterson offers an excellent model. He did not like the Convention’s approach, which he called an “unfortunate compromise.” But, instead of being agenda-driven, he followed what Blackstone taught the founders, which was that his judicial duty was “to interpret the will of the legislator … by exploring [its] intentions at the time when the law was made.”

Prior TaxProf Blog coverage:

• Rob Natelson (Montana), Clarifying The Uncertainty Over Direct And Indirect Taxes In Moore v. United States (July 13, 2024)
• Rob Natelson (Montana), More Evidence That ‘Direct Taxes’ Include Levies On Wealth And Income (July 24, 2024)
• Rob Natelson (Montana), The Constitutional Line On Direct Taxes (Aug. 7, 2024)

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