tended to apply to the power of congress to compel answers to questions, propounded to the officers of railroads, telegraph, and insurance companies, corporations of a public character, over the business methods of which the legislative power may be asserted. As to such corporations, the public good requires that wholesome and strict supervision should be exercised, and all the information needed as the basis for such regulation and control should be produced when required." 10

§ 68. History of the Apportionment of Direct Taxes under the Constitution.

per

The only direct taxes which Congress has apportioned have been taxes on lands, houses and slaves. The first was suggested by a report of Secretary Wolcott on direct taxes in December, 1796.1 That apportioned the sum of two millions of dollars among the states which were subdivided for that purpose, and the collection of each division was placed under the control of a commissioner, with assistant assessors, collectors, supervisors, and inspectors to assist him. The quota of every State was assessed upon houses, lands, dwelling-houses, and slaves. Houses were assessed according to a classified valuation at rates uniform throughout the entire country; and slaves between twelve and fifty years of age at fifty cents head. So much of the quota of any State as was not covered by the levy upon houses and slaves was assessed upon lands and improvements at such rates as might be required to make up the deficiency. The tax was a lien upon the real estate and slaves of the person assessed for two years from the date when it became payable, and collection was enforced by the distraint and sale of personal property.2 Some provisions of the act were taken from the English land tax under William III.3 The next direct tax was under the Acts of July 22, 1813,4 and August 2, 1813,5 of which the former provided for the assessment and collection, and the latter for the apportionment. Under these acts, taxes of three millions of dollars were apportioned among the counties in each State, with a provision that the State legislature might vary the county

10 Judge Ricks, in United States v. Mitchell, 58 Fed. R., 973, pp. 9991000.

§ 68. 1 State Papers on Finance, vol. i, 414.

2 Act of July 14, 1798, ch. 75, 1 St. at L., 53.

310 William III, ch. 9; 4 George III, ch. 2, §§ 3, 4.

43 St. at L., 22.

5 Ibid., 53.

quotas, provided such alterations were duly certified to the Secre tary of the Treasury; but that the levy according to such alterations should be made by virtue of the act of Congress, and not under the act of the State legislature. The tax was levied on the value of lands, houses, and slaves, "at the rate each of them is worth in money." The act provided that any State "may pay its quota into the Treasury of the United States," and thus secure a deduction of fifteen per cent by paying before February 10, 1814, or of ten per cent by paying before May 1, 1814; "and no further proceedings shall thereafter be had under this act in such state.” Seven States under the act assumed the payment of their quotas, in the other eleven the tax was collected by Federal officers like the tax of 1798.7 In 1815, an act was passed providing for an annual direct tax of six millions of dollars to be collected substantially in the same manner as the direct tax of 1813.8 In 1816, the provision for an annual tax was repealed, and a tax of three millions of dollars imposed for the current year.9 In 1815 and 1816, four States assumed the payment of their quotas, and the collection was made by the United States in the other fourteen States.10

Under

The last direct tax was levied during the Civil War. the Act of August 5th, 1861, a direct tax of twenty millions of dollars was imposed for the expense of the Civil War, which was to be collected in the same manner as the direct tax of 1813."1 All of the Northern States, except Delaware and Colorado, assumed the payment of their quotas, largely by credits upon their accounts against the Government for military services and equipments. In

6 Act of August 2, 1813, § 63, St. at L., 71. For an account of the attempt of the Committee of Ways and Means to arrive at such a county apportionment, see their report, State Papers on Finance, ii, 628.

7 State Papers on Finance, ii, 860. Dunbar on the Direct Tax of 1861, Quarterly Journal of Economics, vol. iii, 436-443.

8 Act of January 9, 1815, ch. 21, 3 St. at L., 164. The Act of January 9, 1815, ch. 21, 3 St. at L., 216, applied to the District of Columbia the pro

visions of the Act of January 9, 1815.

9 Act of March 5, 1816, ch. 24, 3 St. at L., 265.

10 Dunbar on The Direct Tax of 1861, Quarterly Journal of Economics, vol. iii, 436-444.

11 Act of August 5, ch. 45, 12 St. at L., 294, the Act of June 7, 1862, ch. 98, 12 St. at L., 422, and the Act of February 6, 1863, ch. 21, 12 St. at L., 640, provided for the collection of this tax in the insurrectionary districts.

Delaware and Colorado, the tax was collected with other internal revenue of the United States after some delay. In the eleven insurrectionary States and the Territory of Utah, the Government was unable to collect more than a small portion of the tax, which was done through sales of lands.12 The attempt to collect the balance was finally abandoned; and in 1891, an act was passed which provided for the repayment to the different States of the amount thus advanced by them, with a provision that when any part of the tax had been collected from an individual tax-payer, the State of which he was a citizen should hold in trust for his benefit the same amount of the money returned.13

The United States has the power to impose a direct tax upon the inhabitants of the District of Columbia or the territories, or to relieve the inhabitants thereof, or a part of the same, from direct taxation without regard to their population.14

The direct tax has never been a tax upon a State, but merely a tax upon the individuals in a State, which in certain cases the State had the right to assume.15 Congress has no power to impose a direct tax upon a State.

§ 69. Direct Taxes.

The term, direct taxes, when used by modern economists, usually denotes taxes of which the burden falls solely upon the taxpayer, such as a poll-tax or a sumptuary tax. All taxes, the burden of which may be shifted by the tax-payer upon another, are called by them indirect. They differ, however, in the appli

12 Dunbar on The Direct Tax of 1861, Quarterly Journal of Economics, vol. iii, 444-461.

13 26 St. at L., ch. 496, p. 822. 14 Loughborough v. Blake, 5 Wheaton, 317.

15 U. S. v. Louisiana, 123 U. S., 32, 38.

§ 69. 1 The British North America Act (20 and 31 Vic., ch. 3, § 92) provides that "in each province the legislature may exclusively make laws in relation to matters coming within the classes of subjects next hereinafter enumerated, that is to say:"

...

"2d. Direct Taxation within the Province in order to the raising of a Revenue for Provincial purposes." It has been held that the term is used with the sense given to it by modern economists such as Mill. (Bank of Toronto v. Lambe, L. R. 6 P. C. 272; 12 Appeal Cases, 515; Attorney-General (Quebec) v. Reed, 10 Appeal Cases, 141); that a stamp act on policies of insurance companies was an indirect tax (Attorney-General v. Queen Insurance Co., 3 Appeal Cases, 1090; Attorney-General (Quebec) v. Reed, 10 Appeal Cases, 141); but that

66

3

cation of this classification, and the subject is between them in great confusion.2 This is not the distinction intended by the Constitution. The subject in our constitutional law is one "exclusively in American jurisprudence." In the Federal Convention, when "Mr. King asked what was the precise meaning of direct taxation, no one answered."4 And it is as hard to give the answer now as then. Attempts to answer it by reference to the definitions of political economists have been frequently made, but without satisfactory results. The enumeration of the different kinds of taxes which Congress was authorized to impose was probably made with very little reference to their speculations.” 5 At that time, the Manchester School, although founded by Adam Smith, had not obtained authority. Smith was never mentioned in the Convention. And he nowhere clearly applies these definitions to the terms. The French economists had more influence upon the leaders of American thought. Their doctrine, which is the butt of Voltaire's wit in "L'Homme à quarante Écus," seems to have been taken from the writings of John Locke. They taught that agriculture is the only productive employment; and that the net product from land, which is found in the hands of the land-owner, is the only fund from which taxation can draw without impoverishing society. Taxes were classified by them as direct when laid immediately upon the land-owner, and as indirect when laid upon some one else, since, according to their doctrine, destined to be borne ultimately by the land-owner. Taxes upon land, or its returns, they called direct taxes. Taxes upon commodities, or consumption, indirect. They disagreed upon the question whether taxes upon persons were direct or indirect.R

a tax on banks, proportioned to the amount of their paid-up capital and the number of their officers is a direct tax (Bank of Toronto v. Lambe, L. R. 6 P. C., 272). See Clement's Canadian Constitution, pp. 424-435; Doutre's British North America Act.

2 See an article by Prof. E. R. A. Seligman on the Income Tax in the Forum for March 5, 1891, vol. xix, p. 48.

3 Mr. Justice Swayne in Springer v. U. S., 102 U. S., 586, 602.

4 Madison Papers, Elliot's Debates, 2d ed., vol. v, p. 451.

5 Chief Justice Chase in Veazie Bank v. Fenno, 8 Wall., 533, 541-542.

6 Supra, § 6, note 1. See, however, Gallatin's suggestion, that the term, "capitation tax," was taken from Adam Smith, in Gallatin's Writings, Adams' ed., vol. iii, pp. 74, 75.

7 Dowell's History of Taxation, vol. ii, p. 124.

8 L'Ordre Naturel des Sociétés Politiques, in Daire's Physiocrates, 474.

Turgot, however, classified taxes upon persons as

direct.9

The apportionment of taxes upon real estate had been previously applied in England as well as France. The English land tax, since the reign of William III, had been apportioned among the counties and other local subdivisions, leaving the rate for each locality to be settled at the point necessary to give the due quota.10 The French taille réelle, a tax on the value of the use of real property, was laid by apportionment among the provinces, each of which determined the manner in which its quota should be collected; and its substitute, the impôt foncier, since 1790, has been similarly collected. The French capitation tax, before the Revolution, was also thus collected. It is not unlikely that the French definitions were in the mind of Gouverneur Morris when he introduced the term direct taxes into the Constitution.12

The same uncertainty as to the meaning of the term prevailed in the State conventions. In that of New York, Chancellor Livingston said that direct taxes were "taxes on land and specific duties" as distinguished from an impost or tariff on imports.13 Jay concurred in this view, saying: "Direct taxes were of two kinds, general and specific." The national government would, without doubt, usually embrace those objects which were uniform throughout the States, for the usual specific articles of luxury.14 In that of Virginia, John Marshall said:

For Quesnay's use of the terms in question, see Daire, vol. i, pp. 83, 127; and for Dupont de Nemours', ibid., vol. ii, pp. 354-358. Cited from Thayer's Constitutional Cases, p. 1326.

In his plan he thus classifies taxes: "Il n'y en a que trois possibles: La directe sur les fonds. La directe sur les personnes, qui devient un impôt sur l'exploitation. L'imposition indirecte, ou sur les consommations." See also to the same effect 4 Geo. III, ch. 2; his " Comparaison de l'Impôt sur le Revenu des Propriétaires et de l'Impôt sur les Consommations," which was a memoir prepared for the use of Franklin. Daire, Physiocrates, i, 394, 396, 409. Cited from Thayer's Constitutional Cases, p. 1326.

10 10 William III, ch. 9. See Dowell's History of Taxation and Taxes in England, vol. iii, pp. 94-97.

11 Pizard, La France, en 1789, 257; De Parieu, Traité de l'Impôt, vol. i, pp. 153, 224. Cited from Thayer's Constitutional Cases, p. 1326.

12 This origin of the phrase "direct taxation" was first suggested in Hamilton's brief in the Carriage Tax Case (Hamilton's Works, vol. vii, p. 845), and was demonstrated in a valuable paper by Professor Charles F. Dunbar, on the Direct Tax of 1861, Quart. Journal Econ., vol. iii, p. 436 (A. D. 1889). Supra,§ 6, notes 1 and 2.

341.

13 Elliot's Debates, 2d ed., vol. ii, p.

14 Ibid., p. 381.