The Volokh Conspiracy

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Wealth Taxes are Direct Taxes that are Subject to the Rule of Apportionment

An originalist analysis


David Schizer, the former Dean of the Columbia University School of Law, and I have just today posted a manuscript on SSRN at:

It will be published in the Florida Law Review (2025).

We argue that the Direct Taxes Clause applies to taxes that fall straight upon a person, while imposts, duties and excises all fall only upon such transactions as: importing goods, buying or selling goods, inheriting an estate or giving a gift, renting someone's property, or selling one's labor to someone else in exchange for money.  We think that a wealth tax falls directly on persons, and not on transactions, as we explain in the above cited draft law review article.

We discuss the original meaning of the Taxation Clauses, court opinions from the Founding to the present day, and arguments in law review articles and amicus briefs made by major scholars. Far from being a glitch in the Constitution, the requirement that direct taxes be apportioned prevents a majority of the states in Congress from imposing a tax that will fall heavily on certain states and regions. The Clause thus not only limits taxes on enslaved persons and undeveloped land of which the South had a lot in 1787; the Direct Tax Clause also bans Congress from taxing ships, manufacturing, or small farms, which were prevalent in the North but scarce in the South. Both types of fiscal raids are made politically impracticable by the Direct Tax Clause.

The Framers meant for the federal government to rely only on indirect taxes in peacetime, but they made available direct taxes that are not geographically biased in wartime. There is an appealing element of voluntariness in indirect taxes, which is that one can always avoid the tax by not engaging in the taxed transaction. Such voluntariness is absent when direct taxes are imposed.