David M. Schizer, Columbia Law School, and Steven G. Calabresi, Northwestern University Pritzker School of Law, have posted Wealth Taxes Under the Constitution: An Originalist Analysis:
A federal wealth tax is high on the wish list of progressive icons like Elizabeth Warren and Bernie Sanders, but is it constitutional? This Article shows that it is a "direct tax," which must be apportioned among the states. This means that the percentage of revenue collected in each state must match its percentage of the population. For instance, if two states each have three percent of the population, each must provide three percent of the revenue from a wealth tax. This leads to an unappealing outcome: if one state is less wealthy, it needs a higher tax rate to supply its share. To rescue wealth taxes from apportionment, distinguished commentators have offered a range of theories. For example, some treat apportionment as a mistake, while others dismiss it as a protection for the shameful institution of slavery.
But these commentators do not give the Framers enough credit. The taxing power was too important for them to be sloppy or to focus only on the institution of slavery. In our view, the taxing power reflects the same influences as the rest of the Constitution. Like the new government’s other features, the taxing power was supposed to be effective but limited. The Framers wanted to solve the fundamental problem under the Articles of Confederation (insufficient revenue), without recreating the fundamental problem under imperial rule (taxation without representation). Specifically, they sought to discourage what we call “fiscal raids,” in which states join forces to enact national taxes that mostly burden other states. As Professors Ackerman and Amar have shown, this risk could arise with an unapportioned tax on enslaved persons, since it would have been collected mainly in the South. But we show that the same was true of other region-specific practices, such as tobacco plantations and undeveloped land in the South, as well as ships, timber, farms, and manufacturing in the North. Apportionment was supposed to protect all these region-specific assets from fiscal raids.
In pursuing these various goals, what did the Framers mean by a “direct tax”? They considered a tax “direct” if it applied to taxpayers themselves, instead of to their transactions. A direct tax could be triggered merely by residing in the jurisdiction or owning property. In contrast, taxes on transactions—including on imports (“imposts”) and on domestic production and consumption (“excises”)—did not have to be apportioned. Admittedly, some courts and commentators have offered the narrower interpretation that “direct” is limited to head taxes and real estate taxes. But at ratifying conventions, John Marshall, Oliver Ellsworth, and other Framers offered a broader definition, which included livestock, business assets, and other personal property. Dicta in an early case, Hylton v. United States offered the narrower interpretation (head and land taxes), but the holding can be reconciled plausibly (although not perfectly) with our interpretation, while most other Supreme Court cases on the Direct Tax Clause align with our reading.
--Dan Ernst
