Source: https://law.justia.com/constitution/us/article-1/24-power-to-tax-and-spend.html
Timestamp: 2019-04-19 10:15:46+00:00

Document:
By the terms of the Constitution, the power of Congress to levy taxes is subject to but one exception and two qualifications. Articles exported from any State may not be taxed at all. Direct taxes must be levied by the rule of apportionment and indirect taxes by the rule of uniformity. The Court has emphasized the sweeping character of this power by saying from time to time that it “reaches every subject,”537 that it is “exhaustive”538 or that it “embraces every conceivable power of taxation.”539 Despite these generalizations, the power has been at times substantially curtailed by judicial decision with respect to the subject matter of taxation, the manner in which taxes are imposed, and the objects for which they may be levied.
Another decision marking a clear departure from the logic of Collector v. Day was Flint v. Stone Tracy Co. ,549 in which the Court sustained an act of Congress taxing the privilege of doing business as a corporation, the tax being measured by the income. The argument that the tax imposed an unconstitutional burden on the exercise by a state of its reserved power to create corporate franchises was rejected, partly because of the principle of national supremacy, and partly on the ground that the corporate franchises were private property. This case also qualified Pollock v. Farmers’ Loan & Trust Co. to the extent that it allowed interest on state bonds to be included in measuring the tax on the corporation.
Subsequent cases have sustained an estate tax on the net estate of a decedent, including state bonds,550 excise taxes on the transportation of merchandise in performance of a contract to sell and deliver it to a county,551 on the importation of scientific apparatus by a state university,552 on admissions to athletic contests sponsored by a state institution, the net proceeds of which were used to further its educational program,553 and on admissions to recreational facilities operated on a nonprofit basis by a municipal corporation.554 Income derived by independent engineering contractors from the performance of state functions,555 the compensation of trustees appointed to manage a street railway taken over and operated by a state,556 profits derived from the sale of state bonds,557 or from oil produced by lessees of state lands,558 have all been held to be subject to federal taxation despite a possible economic burden on the state.
Uniformity Requirement.—Whether a tax is to be apportioned among the states according to the census taken pursuant to Article I, § 2, or imposed uniformly throughout the United States depends upon its classification as direct or indirect.572 The rule of uniformity for indirect taxes is easy to obey. It requires only that the subject matter of a levy be taxed at the same rate wherever found in the United States; or, as it is sometimes phrased, the uniformity required is “geographical,” not “intrinsic.”573 Even the geographical limitation is a loose one, at least if one follows United States v. Ptasynski,574 in which the Court upheld an exemption from a crude-oil windfall-profits tax of “Alaskan oil,” defined geographically to include oil produced in Alaska (or elsewhere) north of the Arctic Circle. What is prohibited, the Court said, is favoritism to particular states in the absence of valid bases of classification. Because Congress could have achieved the same result, allowing for severe climactic difficulties, through a classification tailored to the “disproportionate costs and difficulties . . . associated with extracting oil from this region,”575 the fact that Congress described the exemption in geographic terms did not condemn the provision.
The clause accordingly places no obstacle in the way of legislative classification for the purpose of taxation, nor in the way of what is called progressive taxation.576 A taxing statute does not fail of the prescribed uniformity because its operation and incidence may be affected by differences in state laws.577 A federal estate tax law that permitted deduction for a like tax paid to a state was not rendered invalid by the fact that one state levied no such tax.578 The term “United States” in this clause refers only to the states of the Union, the District of Columbia, and incorporated territories. Congress is not bound by the rule of uniformity in framing tax measures for unincorporated territories.579 Indeed, in Binns v. United States,580 the Court sustained license taxes imposed by Congress but applicable only in Alaska, where the proceeds, although paid into the general fund of the Treasury, did not in fact equal the total cost of maintaining the territorial government.
537 License Tax Cases, 72 U.S. (5 Wall.) 462, 471 (1867).
538 Brushaber v. Union Pac. R.R., 240 U.S. 1 (1916).
539 240 U.S. at 12.
540 253 U.S. 245 (1920).
541 268 U.S. 501 (1925).
542 307 U.S. 277 (1939).
543 78 U.S. (11 Wall.) 113 (1871).
544 Graves v. New York ex rel. O’Keefe, 306 U.S. 466 (1939). Collector v. Day was decided in 1871 while the country was still in the throes of Reconstruction. As noted by Chief Justice Stone in a footnote to his opinion in Helvering v. Gerhardt, 304 U.S. 405, 414 n.4 (1938), the Court had not determined how far the Civil War Amendments had broadened the federal power at the expense of the states, but the fact that the taxing power had recently been used with destructive effect upon notes issued by the state banks, Veazie Bank v. Fenno, 75 U.S. (8 Wall.) 533 (1869), suggested the possibility of similar attacks upon the existence of the states themselves. Two years later, the Court took the logical step of holding that the federal income tax could not be imposed on income received by a municipal corporation from its investments. United States v. Railroad Co., 84 U.S. (17 Wall.) 322 (1873). A far-reaching extension of private immunity was granted in Pollock v. Farmers’ Loan & Trust Co., 157 U.S. 429 (1895), where interest received by a private investor on state or municipal bonds was held to be exempt from federal taxation. (Though relegated to virtual desuetude, Pollock was not expressly overruled until South Carolina v. Baker, 485 U.S. 505 (1988)). As the apprehension of this era subsided, the doctrine of these cases was pushed into the background. It never received the same wide application as did McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819), in curbing the power of the states to tax operations or instrumentalities of the Federal Government. Only once since the turn of the century has the national taxing power been further narrowed in the name of dual federalism. In 1931 the Court held that a federal excise tax was inapplicable to the manufacture and sale to a municipal corporation of equipment for its police force. Indian Motorcycle v. United States, 283 U.S. 570 (1931). Justices Stone and Brandeis dissented from this decision, and it is doubtful whether it would be followed today. Cf. Massachusetts v. United States, 435 U.S. 444 (1978).
545 At least, if the various opinions in New York v. United States, 326 U.S. 572 (1946), retain force, and they may in view of (a later) New York v. United States, 505 U.S. 144 (1992), a Commerce Clause case rather than a tax case.
546 25 U.S. (12 Wheat.) 419, 444 (1827).
547 Snyder v. Bettman, 190 U.S. 249, 254 (1903).
548 South Carolina v. United States, 199 U.S. 437 (1905). See also Ohio v. Helvering, 292 U.S. 360 (1934).
549 220 U.S. 107 (1911).
550 Greiner v. Lewellyn, 258 U.S. 384 (1922).
551 Wheeler Lumber Co. v. United States, 281 U.S. 572 (1930).
552 Board of Trustees v. United States, 289 U.S. 48 (1933).
553 Allen v. Regents, 304 U.S. 439 (1938).
554 Wilmette Park Dist. v. Campbell, 338 U.S. 411 (1949).
555 Metcalf & Eddy v. Mitchell, 269 U.S. 514 (1926).
556 Helvering v. Powers, 293 U.S. 214 (1934).
557 Willcuts v. Bunn, 282 U.S. 216 (1931).
558 Helvering v. Producers Corp., 303 U.S. 376 (1938), overruling Burnet v. Coronado Oil & Gas Co., 285 U.S. 393 (1932).
559 South Carolina v. Baker, 485 U.S. 505, 517 (1988).
560 485 U.S. at 524–25.
561 New York v. United States, 326 U.S. 572, 584 (1946) (concurring opinion of Justice Rutledge).
562 304 U.S. 405 (1938).
563 304 U.S. at 419–20.
564 326 U.S. 572 (1946).
565 326 U.S. at 584.
566 326 U.S. at 589–90.
567 326 U.S. at 596.
568 Wilmette Park Dist. v. Campbell, 338 U.S. 411 (1949). Cf. Massachusetts v. United States, 435 U.S. 444 (1978).
569 485 U.S. 505 (1988).
570 485 U.S. at 523.
571 485 U.S. at 524 n.14.
572 See also Article I, § 9, cl. 4.
573 LaBelle Iron Works v. United States, 256 U.S. 377 (1921); Brushaber v. Union Pac. R.R. Co., 240 U.S. 1 (1916); Head Money Cases, 112 U.S. 580 (1884).
574 462 U.S. 74 (1983).
575 462 U.S. at 85.
576 Knowlton v. Moore, 178 U.S. 41 (1900).
577 Fernandez v. Wiener, 326 U.S. 340 (1945); Riggs v. Del Drago, 317 U.S. 95 (1942); Phillips v. Commissioner, 283 U.S. 589 (1931); Poe v. Seaborn, 282 U.S. 101, 117 (1930).
578 Florida v. Mellon, 273 U.S. 12 (1927).
579 Downes v. Bidwell, 182 U.S. 244 (1901).
580 194 U.S. 486 (1904). The Court recognized that Alaska was an incorporated territory but took the position that the situation in substance was the same as if the taxes had been directly imposed by a territorial legislature for the support of the local government.

References: v. 
 v. 
 v. 
 § 2
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 § 9
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.