New-York tribune., 1901-12-26
DIRECT FEDERAL TAXES.

The demurrer just made in the United States
Circuit Court 10 an Indictment for violation of
the United States revenue law Ievying tax on
stock transfers involves some interesting posi-
bilities- The contention of the defendant is
that a stamp tax on the sale of stock is in sub
stance tax on the stock itself, and is therefore
a direct tax in the meaning of the constitution.
If that is the case. the tax is certainly uncon-
stitutionaI for it is laid uniformly and not on
the people of the States. in proportion to popu
Iation, the constitution requires direct taxes
to be- The question at issue is thus the mean
ing of the words direct taxes as used in the
constitution
That is one of the great problems of ccnstitu-
tionaI Interpretation. In spite of many judicial
decisfons-or partly because of them, for they
are contradictory-the definition is most uncer-
tain This is so largely because the term had
no very definite meaning at the time it was in
corporated into the fundamental law and judges
have since defined il according to their own
theories of political science and according 70
their own views of the purpose of the founders
Of the government in establishing the rule. That
purpose is also somewhat doubtful. and the
difficulty is on that account increased. Some
think the rich States meant practically TO de
prive the federal government of general taxing
powers and confine it to duties on imports and
excuses. Others believe that the rule was simply
the complement TO the concession of three -ffths
representation Of the slaves. The North al
lowed the South to vote its slaves on condition
that it should also pay direct taxes in proper
tion TO their number. This view. which is sup
ported by many contemporary records, discoun-
tenances the notion that the federal govern
ment was not intended to have full power over
every species of taxable property except ex-
levy. If that is true. it is certain that the
trainers of the constitution did not define "di-
rect tax in any such comprehensive fashion as
is now proposed. 1t must have meant to them
merely an immediate property tax, general or
specific If this was their view, the rule was
not al that time inequitable appears.
Property mainly consisted of lands and houses,
which were distributed roughly in proportion to
population. 4 tax on business. however levied
according TO population. is so unjust TO be
impossible. and if such tax is direct the gov
eminent is virtually deprived of this source Of
revenue no matter what its necessity.
The terms direct and indirect taxation are not
scientific, according TO modern theories of eco
nomics, nor were they exact and established at
the time of the Constitutional Convention
Tourgat had distinguished between direct taxes
upon property or persons and indirect taxes on
consumption; and Adam Smith had spoken of
taxing the revenue of subjects directly on the
one hand and indirectly by the taxation of their
expenses on the other. The delegates to the
convention were. some of them, doubtless &C
quainted with the work of the French physo
Gratis and of Adam Smith and perhaps these ex-
pressions explain what they had in mind as
accurately as it is possible to get at what
probably vague to themselves. Such direct
taxes as the government has levied would seem
TO support this view. The first. that of 179S
was assessed upon dwelling houses. lands and
slaves. The second, in 1913. was levied on the
same classes of property. The third, in 1861
was levied on lands and dwelling houses, and
quotas and collected the amounts from their
own citizens.
The definition of direct tax which is invoked
10 overthrow the impost on stock transfers is
something much broader than this If the stamp
tax on transfers is tax on the stock itself,
stamp tax on the sale of playing cards or patent
medicines is tax on the property in the things
| themselves and is direct. So is the tax on the
| distllation of spirits. the manufacture of to-
bacco and the import of goods, though, regard
less of definition, that is constitutional for CO.
ordinate clause of the constitution specifically
| permits it, Such an Interpretation would prac-
tically deprive the government of general reve-
nue. raising power. since a direct tax proper
| toned TO population is almost out of the oues-
| ton under modern conditions. All trials of Il
| have been unjust in operation and disappointing