Calabresi: The Amar Brief in Moore v. United States Should Not be Embraced

Is a Federal Wealth Tax a Direct Tax? Steven Calabresi Responds to the Amar Amicus Brief in Moore.

I am posting this entry for its author, Professor Steven Calabesi:

On December 5, 2023, the Supreme Court will hear oral argument in the most important federalism case since it upheld the constitutionality of President Obama's Affordable Care Act.  The case at issue – Moore v. United States – raises two vital matters:

1) Can Congress tax unrealized capital gains, as Yale Law Professor Bruce Ackerman argues in an amicus brief; and

2) Can Congress enact a Bernie Sanders/Elizabeth Warren-style wealth tax, including on unrealized capital gains, as the two Amar brothers (Akhil Reed Amar and Vikram David Amar) argue?

Because of the huge importance of this case, I am going to respond in this blog post to the Amar brothers (one of whom is my second-best friend in the world, notwithstanding our disagreement in this case). They devoted the third section of their amicus brief to critiquing an amicus brief that I co-filed in Moore arguing against congressional power to impose a wealth tax or to tax unrealized capital gains – a brief which was joined by former Attorney General Edwin Meese III and by Professor Gary Lawson.

The constitutional question in Moore v. United States is whether wealth taxes and taxes on unrealized capital gains have to be apportioned among the states based on their respective populations, which it is practically impossible to do, or whether wealth taxes and taxes on unrealized capital gains have to be merely uniform in every state, which could be easily accomplished.  Ed Meese, Gary Lawson, and I argue that such taxes are direct taxes, which must be apportioned among the states, while the Amar brothers say they are indirect taxes that must merely be uniform among the states, which would make them much easier to enact.

The Taxing Power itself is granted in Article I, Section 8, Clause 1, which says:

"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States."

Article I, Section 9, Clause 4 then critically limits the federal taxing power by saying that:

"No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken."

The rule of apportionment thus applies to "direct taxes"; the rule of uniformity applies only to such indirect taxes as "Duties, Imposts, and Excises.

The flaw in the Amar brothers' brief that I will discuss today is that it construes the text of the Constitution according to the expected applications of certain historical figures rather than its plain objective meaning.  The Amar brothers rewrite Article I, Section 9, Clause 4 to say:

"No Capitation, or Land Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken."

They argue that wealth taxes and taxes on unrealized capital gains in your house or Vanguard fund are perfectly constitutional.  They say, contrary to the text of the Constitution, that Article I, Section 9, Clause 4 bans only federal capitation and land taxes and that nothing else is a direct tax.

The original public meaning of the words "direct tax" is clearly set forth in two law review articles: Robert Natelson, What the Constitution Means by "Duties, Imposts, and Excises"— and "Taxes" (Direct or Otherwise), 66 Case West. U. L. Rev. 297 (2015) and Erik M. Jensen, The Apportionment of "Direct Taxes": Are Consumption Taxes Constitutional?, 97 Colum. L. Rev. 2334 (1997).  Both authors conclude that "direct taxes" included many more taxes than merely a capitation or federal land tax.

Natelson demonstrates conclusively that the phrase "direct taxes" also included taxes on:

"1) Wealth employed in business and domestic life.  Direct taxes included those imposed on land, improvements to land, ('stock in trade'), business equipment, and livestock; 2) Personal and business income.  Direct taxes included levies on rents, business profits, wages, interest, and other income; 3) Business enterprises.  Levies on business profits and occupational fees were direct taxes; 4) Heads.  Poll taxes, also called head taxes or capitations, existed in all of the New England states and in most other states as well.  They were levied both on free persons and slaves.  Capitations were the prevalent way of taxing slaves."  Natelson, supra at 314-316.

It is true that Alexander Hamilton and one Supreme Court Justice, Samuel Chase in Hylton v. United States, 3 U.S. 171 (1796) construed a statute laying a "Duty" on carriages to be a "Duty" but said "I am inclined to think, but of this I do not give a judicial opinion, that the direct taxes contemplated by the constitution, are only two, to wit, a capitation or poll tax *** and a tax on land."  But, this was the original expected application of Hamilton and Chase as to the meaning of very broad constitutional language requiring apportionment of all direct taxes.   The word direct in 1787 meant "Straight; not crooked" according to Samuel Johnson's 1755 Dictionary of the English language and according to Merriam-Webster it means the same thing today in 2023.

The Amar brothers would limit a general term in the Constitution—"direct tax"—to its original expected application "capitation and land taxes" simply because that is what Alexander Hamilton, an extreme nationalist, thought it meant.  (Hamilton wanted to abolish the state governments at the Philadelphia Convention while having a President and Senators who served for life).  This is not the way my friend Professor Akhil Amar usually interprets words in the Constitution.

For example, most Americans expected in 1787, that the Commerce Clause applied only to buying and selling. Professor Akhil Reed Amar, however, quite rightly reads it as applying to non-mercantile interstate transactions like recreational traveling or sailing from one State to another.  Professor Amar's view is that "we must remember that it is a Constitution that we are expounding" that would last "for the ages" as John Marshall said in McCulloch v. Maryland, 17 U.S. 316 (1819).  Professor Amar thus praises McCulloch for not giving the word "necessary", in the Necessary and Proper Clause, its Samuel Johnson 1755 dictionary meaning of "indispensable", but he reads it instead to mean "convenient, or useful."

Professor Akhil Reed Amar also, quite rightly in my view, reads the Fourteenth Amendment's guarantee of birth equality to apply to laws that discriminate on the basis of sex or gender and not only to laws that discriminate on the basis of race – which was the original expected application of the Fourteenth Amendment.  And, he reads the First Amendment's protection of freedom of speech and of the press as applying, not only to printing presses—the original expected application—but also to movies radio, television, and the internet.

In 1787, people held their wealth in land because there was no stock market or bond market yet and few banks.  It is thus not surprising that Hamilton and Chase in 1796 would read broad constitutional language like "direct taxes" as applying only to capitation and "land" taxes.  A wealth tax today would fall "straight; and not crooked" upon one person in exactly the same way a capitation or a land tax would have done in 1787.

In sum, Professor Amar's broad readings of the Commerce Clause, the Necessary and Proper Clause, the First Amendment, and the Fourteenth Amendment all suggest a broad reading of the requirement that the words "Direct Taxes" impose today.  That clause thus, in 2023, applies to a wealth tax as well as to a federal capitation or land tax.  Such taxes are subject to the rule of apportionment and not of uniformity.