can we see that in plain english?

by request: the brushaber breakdown

trigger warning! this post is lengthy (too long for email) and technical (dreadfully boring unless you are as autistic about the income tax as i am).

if you think i have misrepresented any of this, please be specific in your critique so we can all learn from it. thanks in advance.

what follows is my breakdown of this case. i’ll leave you to read the syllabus yourself and i’ll start my analysis from the third paragraph after the part where it says:

MR. CHIEF JUSTICE WHITE delivered the opinion of the Court.

part one - the background of the issue before the court and the bottom line on top (“blot”)

the first two paragraphs lay out that this is a case about a stockholder suing a corporation to keep them from voluntarily paying the income tax of 1913. mr. brushaber claimed the tax act under the 16th amendment was unconstitutional and the supreme court has jurisdiction to opine. the government also provided its opinion.

[we’ll be paying close attention to when mr. white is speaking for the court and when he’s summarizing the plaintiff’s argument, so we don’t mistake the two as it appears happened in this case. i will breakdown that case in a later post.]

mr. white here summarizes what mr. brushaber submitted to the court (“the bill”):

Aside from averments as to citizenship and residence, recitals as to the provisions of the statute, and statements as to the business of the corporation, contained in the first ten paragraphs of the bill, advanced to sustain jurisdiction, the bill alleged twenty-one constitutional objections specified in that number of paragraphs or subdivisions. As all the grounds assert a violation of the Constitution, it follows that, in a wide sense, they all charge a repugnancy of the statute to the Sixteenth Amendment, under the more immediate sanction of which the statute was adopted.

the first 10 paragraphs were on the jurisdiction issue, but the general issue was whether the tax act violated the 16th amendment, spread out over 21 separate objections.

The various propositions are so intermingled as to cause it to be difficult to classify them.

the propositions are the plaintiff’s 21 constitutional objections mentioned above and they’re a confusing mess.

you’ve seen me quote this next part before. here mr. white is summarizing the plaintiff’s conclusion and stating the court’s opinion of that conclusion:

We [the justices] are of opinion, however, that the confusion is not inherent, but rather arises from the [plaintiff’s] conclusion that the Sixteenth Amendment provides for a hitherto unknown power of taxation -- that is, a power to levy an income tax which, although direct, should not be subject to the regulation of apportionment applicable to all other direct taxes.

the subject itself isn’t inherently confusing, the confusion is because all of the plaintiff’s objections stem from the plaintiff’s conclusion that the 16th amendment gave congress the power to levy a new form of tax - an income tax that is direct but should not be apportioned (proportional to the population) like all other direct taxes.

And the far-reaching effect of this erroneous assumption will be made clear by generalizing the [plaintiff’s] many contentions advanced in argument to support it,

blot: the plaintiff’s conclusion that the 16th amendment gave congress the power to levy a new form of direct, non-apportioned income tax is an “erroneous assumption.”

which means the plaintiff’s conclusion is incorrect. the 16th amendment does NOT give congress the power to levy a new form of income tax.

part two - summarizing the plaintiff’s argument

mr. white is about to “generalize the many contentions,” or spell out mr. brushaber’s arguments so he can show you how the plaintiff’s conclusion is wrong.

there are four generalized “contentions.” they all stem from the plaintiff’s incorrect conclusion above. i won’t break them down for you, but this is the part of the opinion that is summarizing the plaintiff’s arguments:

… as follows: (a) The Amendment authorizes only a particular character of direct tax without apportionment, and therefore if a tax is levied under its assumed authority which does not partake of the characteristics exacted by the Amendment, it is outside of the Amendment, and is void as a direct tax in the general constitutional sense because not apportioned.

(b) As the Amendment authorizes a tax only upon incomes "from whatever source derived," the exclusion from taxation of some income of designated persons and classes is not authorized, and hence the constitutionality of the law must be tested by the general provisions of the Constitution as to taxation, and thus again the tax is void for want of apportionment.

(c) As the right to tax "incomes from whatever source derived" for which the Amendment provides must be considered as exacting intrinsic uniformity, therefore no tax comes under the authority of the Amendment not conforming to such standard, and hence all the provisions of the assailed statute must once more be tested solely under the general and preexisting provisions of the Constitution, causing the statute again to be void in the absence of apportionment.

(d) As the power conferred by the Amendment is new and prospective, the attempt in the statute to make its provisions retroactively apply is void because, so far as the retroactive period is concerned, it is governed by the preexisting constitutional requirement as to apportionment.

part three - the problems with the plaintiff’s arguments

the following is the court’s opinion on the above arguments, and you’ve seen me quote this part before:

But it clearly results that the [plaintiff’s] proposition and the contentions under it, if acceded to, would cause one provision of the Constitution to destroy another;

the “proposition” is the plaintiff’s incorrect conclusion above. the “contentions under it” are the (a) - (d) above that mr. white summarized. and if they were true then there would definitely be an issue with the constitution.

… that is, they would result in bringing the provisions of the Amendment exempting a direct tax from apportionment into irreconcilable conflict with the general requirement that all direct taxes be apportioned.

specifically, if the plaintiff’s proposition and contentions were true, then there would be an obvious conflict between the 16th amendment and the part of the constitution that requires direct taxes be proportionate.

Moreover, the tax authorized by the Amendment, being direct, would not come under the rule of uniformity applicable under the Constitution to other than direct taxes,

again, if the plaintiff’s proposition and contentions were true, there would also be an issue where the income tax wouldn’t have to be uniform either, because only indirect taxes have to be uniform.

… and thus it would come to pass that the result of the Amendment would be to authorize a particular direct tax not subject either to apportionment or to the rule of geographical uniformity,

again, if the plaintiff’s proposition and contentions were true, we would have a new type of income tax that didn’t have to be proportionate or uniform.

… thus giving power to impose a different tax in one state or states than was levied in another state or states.

then mr. white provides an example, if the plaintiff’s proposition and contentions were true, of how a potential income tax would look if not required to be proportionate or uniform.

This result, instead of simplifying the situation and making clear the limitations on the taxing power, which obviously the Amendment must have been intended to accomplish, would create radical and destructive changes in our constitutional system and multiply confusion.

the result, if the plaintiff’s proposition and contentions were true, is confusion (and worse - a destruction of our constitutional system), which is the opposite of the obvious intent of the amendment.

part four - the history of the types of taxes, their constitutional requirements, and the basis for classing taxes as direct or indirect

But let us by a demonstration of the error of the fundamental proposition as to the significance of the Amendment dispel the confusion necessarily arising from the arguments deduced from it.

mr. white will now show you why the plaintiff’s fundamental proposition (that the 16th gave congress the power to levy a new form of income tax that is direct but should not be apportioned) is wrong, which will clear up all the confusion.

Before coming, however, to the text of the Amendment, to the end that its significance may be determined in the light of the previous legislative and judicial history of the subject with which the Amendment is concerned, and with a knowledge of the conditions which presumptively led up to its adoption, and hence of the purpose it was intended to accomplish, we make a brief statement on those subjects.

mr. white is about to tell you what the amendment says and what it means, based on a brief history of tax law and what the courts have said about it up to that time, what conditions led up to the adoption of the 16th and what it was intended to do.

[now you might be starting to understand why this opinion is so important. this case is only three years after the 16th amendment was adopted and the latest version of the income tax was imposed, so it’s the rosetta stone of the 16th amendment.]

That the authority conferred upon Congress by § 8 of Article I "to lay and collect taxes, duties, imposts and excises" is exhaustive and embraces every conceivable power of taxation has never been questioned, or, if it has, has been so often authoritatively declared as to render it necessary only to state the doctrine.

there is no question congress already had all the authority it needed in article 1 of the constitution for every form of taxation.

And it has also never been questioned from the foundation, without stopping presently to determine under which of the separate headings the power was properly to be classed, that there was authority given, as the part was included in the whole, to lay and collect income taxes.

and there is no question that income taxes were therefore also already authorized by the constitution.

Again, it has never moreover been questioned that the conceded complete and all-embracing taxing power was subject, so far as they were respectively applicable, to limitations resulting from the requirements of Art. I, § 8, cl. 1, that "all duties, imposts and excises shall be uniform throughout the United States," and to the limitations of Art I., § 2, cl. 3, that "direct taxes shall be apportioned among the several states," and of Art. I, § 9, cl. 4, that "no capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration hereinbefore directed to be taken."

and there is no question that the already complete taxing power was subject to certain limitations - that duties/imposts/excises/indirect taxes be uniform and that capitations/direct taxes be proportionate.

In fact, the two great subdivisions embracing the complete and perfect delegation of the power to tax and the two correlated limitations as to such power were thus aptly stated by Mr. Chief Justice Fuller in Pollock v. Farmers' Loan & Trust Co., supra, at 157 U. S. 557:

"In the matter of taxation, the Constitution recognizes the two great classes of direct and indirect taxes, and lays down two rules by which their imposition must be governed, namely, the rule of apportionment as to direct taxes, and the rule of uniformity as to duties, imposts, and excises."

mr. white quotes the pollock case because the quote perfectly makes his point.

It is to be observed, however, as long ago pointed out in Veazie Bank v. Fenno, 8 Wall. 533, 75 U. S. 541, that the requirements of apportionment as to one of the great classes and of uniformity as to the other class were not so much a limitation upon the complete and all-embracing authority to tax, but in their essence were simply regulations concerning the mode in which the plenary power was to be exerted.

however, the requirements of proportionality and uniformity are not limitations on the power to tax, but simply regulations on how to apply the tax.

In the whole history of the government down to the time of the adoption of the Sixteenth Amendment, leaving aside some conjectures expressed of the possibility of a tax lying intermediate between the two great classes and embraced by neither, no question has been anywhere made as to the correctness of these propositions.

there has never been any question about correctness of the proportionality requirement for direct taxes and the uniformity requirement for indirect taxes. (although there may exist some hypothetical tax that was neither direct nor indirect.)

At the very beginning, however, there arose differences of opinion concerning the criteria to be applied in determining in which of the two great subdivisions a tax would fall.

there has always been, however, some difference in opinion about how to categorize a tax as either direct or indirect.

Without pausing to state at length the basis of these differences and the consequences which arose from them, as the whole subject was elaborately reviewed in Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429, we make a condensed statement which is in substance taken from what was said in that case.

mr. white isn’t planning on going into the details of these different opinions because the pollock case already did. he’s just going to summarize.

Early the differences were manifested in pressing, on the one hand, and opposing, on the other, the passage of an act levying a tax without apportionment on carriages "for the conveyance of persons," and when such a tax was enacted, the question of its repugnancy to the Constitution soon came to this Court for determination. Hylton v. United States, 3 Dall. 171. It was held that the tax came within the class of excises, duties, and imposts, and therefore did not require apportionment, and while this conclusion was agreed to by all the members of the Court who took part in the decision of the case, there was not an exact coincidence in the reasoning by which the conclusion was sustained.

he brings up the hylton case regarding a tax on carriages (the taxi/uber of the day) that was found to be an excise (indirect tax). the justices in that case all agreed it was an excise, but had slightly different opinions as to why it was an excise.

Without stating the minor differences, it may be said with substantial accuracy that the divergent reasoning was this: on the one hand, that the tax was not in the class of direct taxes requiring apportionment, because it was not levied directly on property because of its ownership, but rather on its use, and was therefore an excise, duty, or impost, and on the other, that, in any event, the class of direct taxes included only taxes directly levied on real estate because of its ownership.

basically, the carriage tax was not levied on the ownership of carriages, but on their use (economic activity), and was therefore an indirect tax; and up to that point, only taxes on the ownership of real estate were considered direct.

Putting out of view the difference of reasoning which led to the concurrent conclusion in the Hylton case, it is undoubted that it came to pass in legislative practice that the line of demarcation between the two great classes of direct taxes, on the one hand, and excises, duties, and imposts, on the other, which was exemplified by the ruling in that case was accepted and acted upon.

the hylton case then set the standard going forward regarding how to decide whether a tax was direct or indirect. by clarifying the precedent, the brushaber court implies its agreement.

In the first place this is shown by the fact that, wherever (and there were a number of cases of that kind) a tax was levied directly on real estate or slaves because of ownership, it was treated as coming within the direct class and apportionment was provided for, while no instance of apportionment as to any other kind of tax is afforded.

all previous examples of taxes levied on the ownership of real estate (and human beings) were proportional, and no other types of taxes had been apportioned.

Again, the situation is aptly illustrated by the various acts taxing incomes derived from property of every kind and nature which were enacted beginning in 1861, and lasting during what may be termed the Civil War period.

and there had been many previous examples of taxes on income (derived from property) going back to 1861.

It is not disputable that these latter taxing laws were classed under the head of excises, duties, and imposts because it was assumed that they were of that character inasmuch as, although putting a tax burden on income of every kind, including that derived from property real or personal, they were not taxes directly on property because of its ownership.

and every one of these income taxes had been classed as indirect. they did put a burden on the income derived from the use of property (economic activity), but were not taxes levied on the direct ownership of property.

And this practical construction came in theory to be the accepted one, since it was adopted without dissent by the most eminent of the text writers. 1 Kent, Com. 254, 256; 1 Story, Const. § 955; Cooley, Const.Lim. 5th ed. *480; Miller on the Constitution 237; Pomeroy's Constitutional Law § 281; Hare, Const.Law, Vol. 1, 249, 250; Burroughs on Taxation 502; Ordronaux, Constitutional Legislation 225.

everybody who’s anybody agreed and so the hylton definition of how to determine if a tax was direct became the standard.

part five - the 1894 income tax and what happened in the pollock case

Upon the lapsing of a considerable period after the repeal of the income tax laws referred to, in 1894, an act was passed laying a tax on incomes from all classes of property and other sources of revenue which was not apportioned, and which therefore was, of course, assumed to come within the classification of excises, duties, and imposts which were subject to the rule of uniformity, but not to the rule of apportionment.

we didn’t have an income tax for a while, but then we got one in 1894 and it was an indirect tax (as they all had been) so had to be uniform but not proportionate.

The constitutional validity of this law was challenged on the ground that it did not fall within the class of excises, duties, and imposts, but was direct in the constitutional sense, and was therefore void for want of apportionment, and that question came to this Court and was passed upon in Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429; 158 U. S. 158 U.S. 601.

and mr. pollock challenged the tax because he said it was a direct tax that wasn’t apportioned.

The Court, fully recognizing in the passage which we have previously quoted the all-embracing character of the two great classifications, including, on the one hand, direct taxes subject to apportionment, and on the other, excises, duties, and imposts subject to uniformity, held the law to be unconstitutional in substance

and the pollock court, while agreeing that direct taxes require apportionment and indirect taxes require uniformity, ultimately decided that the new tax was unconstitutional …

… for these reasons: concluding that the classification of direct was adopted for the purpose of rendering it impossible to burden by taxation accumulations of property, real or personal, except subject to the regulation of apportionment, it was held that the duty existed to fix what was a direct tax in the constitutional sense so as to accomplish this purpose contemplated by the Constitution. (157 U.S. 157 U. S. 581.)

for the reason that the constitutional purpose of requiring direct taxes be proportionate was to prevent the burden of taxation from allowing the accumulation of property. the court said there was a duty to “fix” the tax to accomplish that constitutional purpose.

[so we see the ultimate purpose of perpetuating the lie that our current income tax is direct but not required to be apportioned is to prevent the people from accumulating the resources needed to oppose tyranny.]

Coming to consider the validity of the tax from this point of view, while not questioning at all that in common understanding it was direct merely on income and only indirect on property, it was held that, considering the substance of things, it was direct on property in a constitutional sense, since to burden an income by a tax was, from the point of substance, to burden the property from which the income was derived, and thus accomplish the very thing which the provision as to apportionment of direct taxes was adopted to prevent.

the pollock court, while recognizing the burden of the tax was not directly on the ownership of property, decided it was effectively a burden on the accumulation of property, which the constitution’s proportionality requirement was meant to prevent.

As this conclusion but enforced a regulation as to the mode of exercising power under particular circumstances, it did not in any way dispute the all-embracing taxing authority possessed by Congress, including necessarily therein the power to impose income taxes if only they conformed to the constitutional regulations which were applicable to them.

however, the pollock conclusion (that the 1894 income tax was unconstitutional because of the regulations on how to apply the power to tax) was in no way meant to imply congress did not already have a complete power to impose income taxes, as long as they followed the regulations (uniformity for indirect taxes).

Moreover, in addition, the conclusion reached in the Pollock case did not in any degree involve holding that income taxes generically and necessarily came within the class of direct taxes on property, but, on the contrary, recognized the fact that taxation on income was in its nature an excise entitled to be enforced as such

and here mr. white makes it clear that the pollock conclusion was NOT that income taxes in general were direct, but on the contrary, by their nature, income taxes are inherently indirect …

… unless and until it was concluded that to enforce it would amount to accomplishing the result which the requirement as to apportionment of direct taxation was adopted to prevent, in which case the duty would arise to disregard form and consider substance alone, and hence subject the tax to the regulation as to apportionment which otherwise as an excise would not apply to it.

and inherently indirect income taxes should be enforced as uniform, unless to do so would then result in the burden of the tax preventing the accumulation of property, as mentioned above, and then the tax should be proportionate.

Nothing could serve to make this clearer than to recall that, in the Pollock case, insofar as the law taxed incomes from other classes of property than real estate and invested personal property -- that is, income from "professions, trades, employments, or vocations" (158 U.S. 158 U. S. 637) -- its validity was recognized; indeed, it was expressly declared that no dispute was made upon that subject, and attention was called to the fact that taxes on such income had been sustained as excise taxes in the past. Id., p. 158 U. S. 635.

and the fact that pollock makes clear that all other types of incomes taxed by the 1894 act were valid and not disputed and had all been previously classed as excises, shows how the pollock opinion was quite limited in its effect on income taxes in general.

The whole law was, however, declared unconstitutional on the ground that to permit it to thus operate would relieve real estate and invested personal property from taxation, and

"would leave the burden of the tax to be borne by professions, trades, employments, or vacations [sic], and in that way what was intended as a tax on capital would remain, in substance, a tax on occupations and labor"

(id., p. 158 U. S. 637) -- a result which, it was held, could not have been contemplated by Congress.

and even though the constitutional problem with the 1894 income tax was limited to only the regulation of the income tax where the incomes were derived from the ownership of property, the whole thing was declared unconstitutional because it was assumed congress would not have meant for the tax to be levied only on occupations and labor.

part six - what the 16th amendment says and what it means

This is the text of the Amendment:

"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."

It is clear on the face of this text that it does not purport to confer power to levy income taxes in a generic sense -- an authority already possessed and never questioned --or to limit and distinguish between one kind of income taxes and another, but that the whole purpose of the Amendment was to relieve all income taxes when imposed from apportionment from a consideration of the source whence the income was derived.

mr. white states that it is clear (or at least it was at that time) that the 16th does NOT give congress any power to tax incomes that it did not already have, and the 16th does not limit or distinguish between the different kinds of income taxes.

but what the 16th does do is to clarify that [inherently indirect] income taxes do not need to be apportioned, even when the source of the income is considered.

Indeed, in the light of the history which we have given and of the decision in the Pollock case, and the ground upon which the ruling in that case was based, there is no escape from the conclusion that the Amendment was drawn for the purpose of doing away for the future with the principle upon which the Pollock case was decided -- that is, of determining whether a tax on income was direct not by a consideration of the burden placed on the taxed income upon which it directly operated, but by taking into view the burden which resulted on the property from which the income was derived, since, in express terms, the Amendment provides that income taxes, from whatever source the income may be derived, shall not be subject to the regulation of apportionment.

and mr. white is now summarizing that everything he stated above in parts four and five only prove the point that the 16th amendment had a very specific purpose.

and that purpose was to prevent another court from doing what pollock did by deciding that an [inherently indirect] income tax needed to be apportioned when the source of the income was the ownership of property.

part seven - summarizing everything we learned above about the 16th amendment in order to apply it to the case at hand

From this in substance it indisputably arises, first, that all the contentions which we have previously noticed concerning the assumed limitations to be implied from the language of the Amendment as to the nature and character of the income taxes which it authorizes find no support in the text, and are in irreconcilable conflict with the very purpose which the Amendment was adopted to accomplish.

“all the [plaintiff’s] contentions” as summarized in (a) - (d) above, are not supported by the text of the amendment and in fact are in “irreconcilable conflict with” the whole purpose of the 16th amendment as mr. white has shown above.

Second, that the contention that the Amendment treats a tax on income as a direct tax although it is relieved from apportionment and is necessarily therefore not subject to the rule of uniformity as such rule only applies to taxes which are not direct, thus destroying the two great classifications which have been recognized and enforced from the beginning, is also wholly without foundation

and the [plaintiff’s] contention that the 16th amendment treats income taxes as direct but don’t need to be apportioned (and also don’t need to be uniform) is “wholly without foundation.”

in other words: totally f$%king wrong.

… since the command of the Amendment that all income taxes shall not be subject to apportionment by a consideration of the sources from which the taxed income may be derived forbids the application to such taxes of the rule applied in the Pollock case by which alone such taxes were removed from the great class of excises, duties, and imposts subject to the rule of uniformity, and were placed under the other or direct class.

and clearly the amendment was meant to prevent another pollock ruling, which was the only case where income taxes were treated as direct, instead of indirect as they always had been, because of a consideration of the source of the income.

This must be unless it can be said that, although the Constitution, as a result of the Amendment, in express terms excludes the criterion of source of income, that criterion yet remains for the purpose of destroying the classifications of the Constitution by taking an excise out of the class to which it belongs and transferring it to a class in which it cannot be placed consistently with the requirements of the Constitution.

and what mr. white says above about the amendment “must be” true because (playing devil’s advocate here) if the source of the income is not excluded as a criteria for determining whether the tax is direct, then it would destroy the direct/indirect classifications altogether by taking excises out of the indirect class in which they inherently belong and trying to shoehorn them into the direct class, which cannot be done consistently.

Indeed, from another point of view, the Amendment demonstrates that no such purpose was intended, and, on the contrary, shows that it was drawn with the object of maintaining the limitations of the Constitution and harmonizing their operation.

the amendment itself shows that its purpose was NOT to destroy the direct/indirect classifications in the constitution, but to maintain them and to harmonize the operation of those distinct classifications.

We say this because it is to be observed that, although from the date of the Hylton case, because of statements made in the opinions in that case, it had come to be accepted that direct taxes in the constitutional sense were confined to taxes levied directly on real estate because of its ownership, the Amendment contains nothing repudiation or challenging the ruling in the Pollock case that the word "direct" had a broader significance, since it embraced also taxes levied directly on personal property because of its ownership,

we saw in the hylton case that direct taxes were only levied directly on the ownership of real estate (and human beings), and the 16th amendment does not contradict the pollock ruling that broadened the direct tax classification to taxes levied on the ownership of other personally owned property too.

… and therefore the Amendment at least impliedly makes such wider significance a part of the Constitution -- a condition which clearly demonstrates that the purpose was not to change the existing interpretation except to the extent necessary to accomplish the result intended -- that is, the prevention of the resort to the sources from which a taxed income was derived in order to cause a direct tax on the income to be a direct tax on the source itself, and thereby to take an income tax out of the class of excises, duties, and imposts, and place it in the class of direct taxes.

the 16th amendment is implied to make that broader definition of direct taxes (as being taxes specifically levied against all personally owned property) constitutional and confirms the purpose of the 16th was not to change this defining characteristic of direct taxes, except as necessary to avoid placing income taxes in the class of direct taxes by pointing to the source of the income.

part eight - where the plaintiff’s contentions about the 1913 income tax are addressed and refuted

We come, then, to ascertain the merits of the many contentions made in the light of the Constitution as it now stands -- that is to say, including within its terms the provisions of the Sixteenth Amendment as correctly interpreted.

mr. white intends to opine on “the [plaintiff’s] many contentions” in (a) - (d) now that the confusion about the constitution and the 16th amendment has been resolved.

the remainder of the opinion is specific to the 1913 income tax act and the issues mr. brushaber raises about it’s constitutionality. you can read it if you like, but it’s not relevant to our current discussion on whether the 16th amendment authorizes a non-apportioned direct income tax - IT DOES NOT.

was this helpful at all? did i make it more or less confusing? what [constructive] feedback do you have?

and do you agree that, based on the above, when the irs states "the sixteenth amendment authorizes a non-apportioned direct income tax" they are wrong (lying)? if not, why not?