Simone Lawson
The US Constitution gives Congress the power to tax but also places limits on that power. For example, direct taxes, such as income taxes, must be apportioned based on population. The Constitution also forbids taxes on exports, and taxes that are regulatory penalties in areas that Congress cannot regulate directly. The Sixteenth Amendment, passed in 1913, established Congress's right to impose a federal income tax, which was previously considered a direct and forbidden tax. The First Amendment does not provide a right to refuse to pay income taxes on religious or moral grounds.
| Characteristics | Values |
|---|---|
| Taxes on exports | Forbidden |
| Direct taxes | Must be apportioned among the states in proportion to their populations |
| Capitation or other direct taxes | Must be laid in proportion to the Census or enumeration |
| Income taxes | Forbidden until 1913 |
| Collection of federal income taxes | Cannot constitute a "taking" of property without due process of law, in violation of the Fifth Amendment |
| Religious or moral grounds | Cannot be refused to pay income taxes |
| Federal income tax laws | Cannot be unconstitutional because the Sixteenth Amendment was not properly ratified |
| The Sixteenth Amendment | Does not authorize a direct non-apportioned federal income tax on US citizens |
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What You'll Learn
Taxes on exports
The US Constitution gives Congress the power to tax but also places limits on that power. Article I, Section 8, Clause 1 of the Constitution provides Congress with broad authority to lay and collect taxes for federal debts, common defence, and general welfare. However, the Constitution has placed limits on that power. For example, direct taxes, such as income taxes, must be apportioned based on population.
One type of tax that is expressly forbidden by the Constitution is taxes on exports. The Constitution states that "no tax or duty shall be laid on articles exported from any state". This means that articles exported from an individual state cannot be taxed at all. This restriction is part of the Constitution's limit on Congress's power to tax and is intended to protect interstate commerce and ensure uniform taxation throughout the country.
The prohibition on taxing exports is based on the principle that exports are essential to interstate commerce and should not be burdened with additional taxes. This restriction also recognises that exports are often subject to varying state regulations and taxes, and imposing an additional federal tax would create an uneven playing field for businesses across different states.
It's important to note that while taxes on exports are prohibited, the government can still regulate exports through other means. For example, the government may require certain packaging or labelling standards for exported goods, or impose health and safety regulations, without directly taxing the export itself.
In some cases, the line between a permissible regulation and an unconstitutional tax on exports can be blurry. For example, a stamp tax on bills of lading or marine insurance policies related to exports has been deemed a forbidden tax on exports. On the other hand, a requirement to stamp packages of exported tobacco to prevent fraud was upheld as a valid regulatory measure rather than a tax on exports. These cases demonstrate the complexity of interpreting the Constitution's prohibition on taxes on exports and the importance of judicial review in clarifying these distinctions.
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Direct taxes without apportionment
The US Constitution gives Congress the power to tax but also places limits on that power. Direct taxes, which are taxes paid directly to the government by an individual or business, must be apportioned based on population.
The Constitution has been interpreted to prohibit Congress from imposing certain taxes. For example, in United States v. Constantine, the Court struck down a federal excise tax on liquor dealers operating in violation of state law. The Court construed the Constitution to prohibit Congress from imposing the excise tax when the purpose of the tax was to punish rather than raise revenue. The majority concluded that Congress exceeded its authority by penalizing liquor dealers for violating state law, as such regulation was reserved for states.
In 1895, the Supreme Court held a general income tax unconstitutional as an unapportioned direct tax. Pollock v. Farmers' Loan & Trust Co. (1895). The Court distinguished this from a tax on business or employment income, which it described as a permissible excise (an indirect tax). In contrast, the Court held in 1911 that a tax on corporate income was constitutional as a uniform excise—a type of indirect tax. Flint v. Stone Tracy Co. (1911). The Court reasoned that the original income tax applied directly to humans, while the corporate income tax applied indirectly through the corporate entity.
The Sixteenth Amendment, passed by Congress in 1909 and ratified in 1913, established Congress's right to impose a federal income tax. This amendment resolved the issue of unapportioned direct taxes by replacing the income tax apportionment requirement with a new requirement that a tax on income need not be apportioned so long as the tax is imposed on income “derived from a source”.
In 2012, the Supreme Court narrowly interpreted the direct tax definition in relation to the Affordable Care Act (ACA). The Court held that the ACA penalty on persons without minimum health insurance was a tax, but not a direct tax. By citing Pollock, the Court removed any argument that the penalty was supportable as an income tax subject to the “derived from a source” test.
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Taxes as regulatory penalties
The Constitution does provide Congress with broad authority to lay and collect taxes for federal debts, common defence, and the general welfare. However, there is a limit to this power, as the Constitution prohibits Congress from imposing taxes that are intended to regulate conduct.
In the case of National Federation of Independent Business v. Sebelius (NFIB), the Court reaffirmed that the Constitution prohibits Congress from using the taxing power to impose taxes that are regulatory penalties. The Court ruled that such taxes are only valid if Congress has separate constitutional authority to regulate the subject matter at issue.
For example, in United States v. Constantine, the Court struck down a federal excise tax on liquor dealers operating in violation of state law. The Court found that the purpose of the tax was to punish rather than raise revenue, and therefore exceeded Congress's authority.
On the other hand, in NFIB v. Sebelius, the Court upheld the constitutionality of a provision in the Patient Protection and Affordable Care Act (ACA) requiring individuals to either purchase minimum health insurance or pay a penalty. The Court ruled that the payment due in lieu of purchasing health insurance was a tax and not a penalty, and therefore a permissible use of Congress's authority.
In summary, while Congress has broad power to lay and collect taxes, it cannot use taxes as a means of regulating conduct or imposing penalties without separate constitutional authority to regulate the subject matter.
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Taxes on income
The US Constitution gives Congress the power to tax but also places some limits on that power. The Constitution has placed limits on the power of taxation by stating that direct taxes (taxes that must be paid directly to the government by an individual or business, i.e. income taxes) must be apportioned based on population. Articles exported from an individual state may not be taxed at all.
The Sixteenth Amendment, passed by Congress on July 2, 1909, and ratified on February 3, 1913, established Congress's right to impose a federal income tax. This amendment resolved the issue of income tax apportionment by stating that a tax on income need not be apportioned as long as the tax is imposed on income "derived from a source".
The Supreme Court has also weighed in on how far taxes can go. In 1895, the Supreme Court held a general income tax unconstitutional as an unapportioned direct tax. However, in 1911, the Court held that a tax on corporate income was constitutional as a uniform excise tax, which is a type of indirect tax.
Some individuals or groups argue that the collection of federal income taxes constitutes a "taking" of property without due process of law, in violation of the Fifth Amendment. However, the United States Supreme Court has stated that the Fifth Amendment is not a limitation upon the taxing power conferred upon Congress by the Constitution.
In some cases, the structure of a taxation scheme may suggest that Congress intends to regulate under a separate constitutional authority. The imposition of a tax as a penalty for such regulation is valid as long as Congress has the separate authority to do so. For example, in 2012, the Court upheld the constitutionality of a provision in the Patient Protection and Affordable Care Act (ACA) that required individuals to either purchase minimum health insurance or pay a penalty. The Court ruled that the payment due in lieu of purchasing minimum health insurance was a constitutionally permissible use of Congress's authority under the taxing power.
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Taxes on property
The US Constitution gives Congress the power to tax but also places some limits on that power. One of the limits on Congress's power to tax is that direct taxes must be apportioned among the states in proportion to their populations.
Until 1913, a tax on either personal or real property income was effectively forbidden because such taxes were considered direct and not easily apportioned. In 1895, the Supreme Court held a general income tax unconstitutional as an unapportioned direct tax.
In 1913, the Sixteenth Amendment was passed, authorizing an unapportioned tax on income "derived from a source". The Amendment resolved the issue of taxation on property income by replacing the income tax apportionment requirement with a new requirement that a tax on income need not be apportioned as long as the tax is imposed on income "derived from a source".
Some individuals or groups have argued that federal income taxes constitute a "taking" of property without due process of law, in violation of the Fifth Amendment. However, the United States Supreme Court has stated that the Fifth Amendment is not a limitation upon the taxing power conferred upon Congress by the Constitution.
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Frequently asked questions
The US Constitution does not expressly forbid any type of tax. However, the Constitution does place limits on Congress's power to tax. For example, direct taxes, such as income taxes, must be apportioned among the states in proportion to their populations. Articles exported from a state may not be taxed at all.
Direct taxes are taxes that must be paid directly to the government by an individual or business, such as income taxes. Indirect taxes are duties, imposts, and excises, which must be uniform throughout the country.
No, the First Amendment does not provide a right to refuse to pay income taxes on religious or moral grounds. The Religious Freedom Restoration Act (RFRA) also does not afford a right to avoid payment of taxes for religious reasons.
