Bruce Ackerman
In Moore v. United States, the Court will decide whether the Direct Tax Clauses of the Constitution prohibit Congress from imposing wealth taxes. The case is set for argument on December 5th, and together with Joseph Fishkin and William Forbath, I have submitted an amicus brief that seeks to establish that the case confronts the originalists on the Court with a crucial test – they can protect the wealthy from taxation only at the price of repudiating the Original Understanding of the Income Tax Amendment.
Here is a Summary of our Argument. While the brief has been filed on our behalf, it will only be available in the Court’s record on Friday. If anyone would like to read it before then, please send a request to my administrative assistant, jennifer.marshall@yale.edu, and she will send you a copy.
Summary of the Argument
The petitioners’ argument requires this Court to
repudiate the original understanding of the Sixteenth Amendment.[1]
The historical sources demonstrate that both the framers and the ratifiers of
the Amendment had a clear aim. They were determined to restore the broad
congressional power over taxation that the Supreme Court had consistently
upheld in an unbroken line of precedents going back to the 1790s—but which had
been repudiated by a 5-to-4 majority in a single case in 1895, Pollock v.
Farmers’ Loan & Trust Co., 158 U.S. 601 (1895) (Pollock II).[2] Pollock
refashioned the Constitution’s
“direct tax” clauses into a ban on income taxation—a role these clauses had
never before played. Indeed, only fifteen years earlier, the Court had
unanimously upheld an income tax statute of the kind that five Justices rejected
in Pollock.
By redefining
income taxes as “direct,” the Pollock
majority precluded Congress from enacting them at all, since they were not, and
could not practically be, apportioned by population. As the Pollock dissenters
explained, this meant that the majority was inserting into the Constitution a
scheme that would protect the property of some of the wealthiest Americans from
any plausible form of taxation. The Pollock majority was
disabling Congress from building a tax system that spread the burdens of
taxation fairly across the entire society; one class would be privileged with a
Court-made constitutional exemption.
Justice John
Marshall Harlan wrote the main Pollock
dissent. In his famous dissent a year later in Plessy v. Ferguson,
Harlan would argue that the Constitution “neither knows nor tolerates classes
among citizens” but ensures that “[t]he humblest is the peer of the most
powerful.” 163 U.S. 537, 559 (1896) (Harlan, J., dissenting). His Pollock dissent likewise
argued that it was wrong for the Court to create a special class of privileged
people who, alone among Americans, would be constitutionally immune from seeing
their fortunes taxed.
The public
response to Pollock was
shock and outrage at this sudden reversal of century-long Congressional
practice and judicial precedent, catalyzing a direct legislative challenge to the decision. In 1898, Congress passed another
progressive tax—this time on inheritances, rather than income—and in Knowlton
v Moore, 178 U.S. 41 (1900), the Court
refused to stand behind Pollock. Instead, it issued a unanimous opinion
upholding the inheritance tax, despite the appellants’ compelling argument that
Pollock’s rationale applied even more powerfully in Knowlton.
This demonstration
of judicial restraint failed to deflect the broad-based popular opposition to Pollock
itself—which led a bipartisan supermajority in Congress to frame the Sixteenth
Amendment in the specific terms necessary to reverse Pollock and thereby
restore the broad power to tax that Pollock had
undermined. To that end, the Amendment granted Congress plenary “power to lay
and collect taxes on incomes,” rather than specifically authorizing other
forms of taxation, whose constitutional legitimacy had not been directly
assaulted. U.S. Const., am. XVI. As state
legislatures considered the Amendment, the Supreme Court itself reinforced the
point. In Flint v. Stone Tracy Co.,
220 U.S. 107 (1911), the Court again
refused to extend the reasoning of Pollock,
unanimously upholding the corporate income tax against constitutional
challenge. In doing so, the Justices were reinforcing the argument repeatedly
made in the course of the ratification debate in the states, which added the
Sixteenth Amendment to the Constitution in 1913. In short, by reversing Pollock, the American
People were reaffirming Congress’s
plenary power over taxation.
In
Congress and in the states, the Sixteenth Amendment’s advocates repeatedly
invoked the language of the Pollock dissents to justify their
initiative—especially Justice Harlan’s demonstration of the imperative need to
restore the long-standing principle under which no class has a special
constitutional exemption from tax. During the proposal and ratification of the
Amendment, the overriding aim of the American People was to reaffirm an
understanding of the Constitution that assigned to the political branches, not
the courts, the duty of constructing a broad-based and equitable tax
system. Once the text made it clear that
Congress could impose “taxes on incomes, from
whatever source derived,” the political branches could once again proceed
with this work unfettered by restrictions invented by Supreme Court Justices,
as the nation confronted the challenges of the twentieth century.
Given this
original understanding, it would be truly unprecedented if this Court
nevertheless resurrected the 5-to-4 decision in Pollock. It was one
thing for Pollock to repudiate a century of history and tradition. It
would be quite another thing for this Court to repudiate the self-conscious
decision by the American People to restore Congress’ plenary power of
taxation—especially at a time when Congress is struggling to deal with its
constitutional responsibility to “raise and collect taxes” in a manner that
will fulfill the nation’s fiscal responsibilities in the twenty-first century.
We urge the Court
to affirm the decision below.
[1] The government’s brief in this case
conclusively demonstrates that tax provisions like the one at issue here fall
within a long tradition of taxing undistributed earnings, and that the
Sixteenth Amendment imposes no realization requirement. But we think it is important for the Court to
understand that the Amendment’s original public meaning cuts squarely against
what petitioners are asking the Court to do.
Far from imposing a realization requirement, the Sixteenth Amendment was
framed and ratified to put an end to judicial efforts to narrow Congress’ broad
constitutional power to tax through misuse of the direct tax clauses—the error
of Pollock that petitioners are now urging this Court to repeat.
[2] This cited decision was issued after rehearing. The
original decision is Pollock v. Farmers’ Loan & Trust Co., 157 U.S.
429 (1895) (Pollock I).