Interpreting the Sixteenth Amendment
Jensen, Erik M., Constitutional Commentary
Readers of Constitutional Commentary may have missed the brouhahas, but Professor Calvin Johnson and I have been arguing for several years about the meaning of the Direct-Tax Clauses of the Constitution (1) and the Sixteenth Amendment to that Constitution. (2) I'm happy to say we disagree on almost everything, and less happy to note that neither constitutional lawyers nor tax lawyers seem to care very much about any of these issues. (3)
Our disagreements aren't only about academic trivia. For those who insist on practical consequences in legal arguments, there really may be something at stake here. The Direct-Tax Clauses, parts of the original Constitution, impose a cumbersome apportionment requirement on taxes that are "direct"--a rule tied to the apportionment rule for representation in the House of Representatives. In its original form, Article I, section 2 provided that
[r]epresentatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons.
The special counting conventions for slaves and "Indians not taxed" disappeared long ago, (4) but the apportionment rule remains. And Article I, section 9, clause 4 similarly provides that "[n]o Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken."
Everyone agrees that apportionment makes direct taxes very difficult to implement. The Sixteenth Amendment, ratified in 1913, provided some relief, eliminating apportionment as a requirement for "taxes on incomes": "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration." But the Amendment seemed to leave apportionment intact for other direct taxes, whatever they are. Avoiding apportionment thus requires that a levy be either indirect, in which case the Direct-Tax Clauses won't kick in at all (and the Sixteenth Amendment will be irrelevant), or a tax on incomes, which the Sixteenth Amendment immunizes.
A broad definition of "direct taxes" coupled with a narrow conception of "taxes on incomes" could leave the Direct-Tax Clauses with application broad enough to prevent significant change in the way the United States raises revenue. In the last decade, several new forms of national taxation have been proposed, including taxes on wealth (5) and various types of consumption taxes. (6) If these taxes would be direct but wouldn't be taxes on incomes, they would have to be apportioned to be constitutionally valid. And if apportionment would be required for a proposed tax, the tax probably wouldn't be enacted: it's been 142 years since Congress went to the trouble of apportioning a tax. (7)
All of this is a long-winded way of explaining why I'm discussing the Direct-Tax Clauses in an exchange on interpreting the Sixteenth Amendment. The process of interpreting the Amendment is inevitably also the process of interpreting the Clauses. You can't hope to understand the Amendment without understanding what it was a reaction to.
The scope of the Amendment and the scope of the Clauses depend on the interpretation of two terms, "direct taxes" and "taxes on incomes." The Sixteenth Amendment doesn't matter, under any theory of interpretation, unless the Direct-Tax Clauses have some substance--unless, that is, the term "direct taxes" encompasses a significant body of levies. (8) And the Direct-Tax Clauses have no remaining substance today if every levy that might otherwise have been subject to the Clauses can be characterized as a "tax on incomes."
My conclusions about the proper way to interpret the Direct-Tax Clauses and the Sixteenth Amendment are simple: constitutional provisions ought to be taken seriously, and we ought to resist interpretive principles that would have the effect of gutting those provisions. …