Fixing the Constitutional Absurdity of the Apportionment of Direct Tax
Johnson, Calvin H., Constitutional Commentary
The Constitution requires that direct taxes be apportioned among the states according to population. (1) Before the abolition of slavery, the formula for apportionment counted each slave as three-fifths of a free person. Indeed, apportionment of tax was brought into the Constitution to impose a disincentive on slavery. An apportioned or direct tax is like a requisition from a state with each state having a quota to satisfy, except that the Congress determines the objects and rates of tax and collects the state quota directly from individuals. Apportionment requires that federal tax rates must vary among the states so that two states with the same population, counting slaves as required, will have the same tax payment.
Apportionment of tax among the states by population turns out to be an absurd requirement, almost always impossible or else so perverse in effect that no democracy, indeed no rational government, could adopt it. Apportionment by population preys upon poor states, requiring tax rates to be highest where the tax base is thinnest. Apportionment by state can force an entire state's quota to fall upon a few taxpayers, perhaps upon a single innocent taxpayer. We now know that the drafters of the Constitution did not see the perversities. The framers said kind things about apportionment of tax that are impossible to reconcile with its unavoidable effects.
The apportionment clause has had an accidental but venomous effect on federal tax policy over the years. The Sixteenth Amendment to the Constitution now allows a federal income tax without apportionment among the states. Apportionment, however, threatens to make a tax unconstitutional if Congress strays beyond some narrow and silly definition of "income." Basing federal income tax on "unrealized" changes in fair market value, for instance, is probably the only way to solve some very knotty problems in tax policy and to minimize the damage that taxation does to the economy. (2) It is argued, however, that a tax on unrealized amounts is not constitutional because unrealized amounts are not income under the Sixteenth Amendment and because tax on unrealized amounts is a direct tax that fails because it cannot be apportioned. (3) There have been calls from the right for replacing federal income tax with a national consumption tax or sales tax (4) and calls from the left for enacting a federal wealth tax. (5) Apportionment is said to cast vetoes in both directions. (6) Depending on your politics, the killing effect of apportionment is sometimes a tragedy and sometimes a lucky strike. Still, none of it has anything to do with the values and purposes that created the constitutional requirement--or with rational tax policy. The killing effect in random directions cannot be consistently or coherently right.
This article argues that nothing in the original meaning of apportionment justifies treating apportionment as a barrier to any federal tax. Apportionment was brought into the Constitution, in the midst of a debate about determining representation in Congress, so as to discourage the South from acquiring more slaves. The critical aspect, originally, was that slaves would be included in the count at three-fifths. "Direct tax" in 1787 was a synonym for "apportioned tax," and the meaning of the term varied according to whether the tax was apportioned at the federal level. The best understanding of the original bargain, accordingly, is that the mandatory remedy was not that any taxes should be apportioned, but rather that the slaves had to be included in the calculation of Southern taxes, counted at three-fifths, should Congress choose to apportion a tax. There is no evidence in the original debates that anyone, whether in favor of or opposed to federal direct tax, thought of apportionment as preventing any federal tax. For better or worse, both proponents and opponents of the Constitution called the power to lay direct taxes "unrestricted." The grand purpose of the Constitution was to give Congress such tax powers as necessary to pay Revolutionary War debts. …