PART I. OVERVIEW Section 1. Constitutional Sources of Federal Taxing Power 1 A. GENERAL Congress is given the power to tax under Article I, Section 8, clause 1 of the United States Constitution: The Congress shall have Power to lay and collect Taxes, The general taxing power under Article I, Section 8, clause 1 is limited in several respects. Under the last phrase of this clause: All Duties, Imposts and Excises shall be uniform through- In addition, Article I, Section 9, clause 5 provides: No Tax or Duty shall be laid on Articles exported from And Article I, Section 9, clause 4 provides: No Capitation, or other direct, Tax shall be laid, unless in The uniformity required of excise taxes and other indirect taxes is a geographical limitation. That is, the subject matter must be taxed at the same rate wherever found, and the limit does not bar progressive rates and nongeographic classifications. La Belle Ironworks v. United States, 256 U.S. 377 (1921); Knowlton v. Moore, 178 U.S. 41 (1900); Head Money Cases, 112 U.S. 580 (1884). B. PROPERTY TAXES A tax on real or personal property is a direct tax. Accordingly, to survive constitutional scrutiny under Article I, Section 9, such a tax must be apportioned among the several States in accordance with the census. There is presently no Federal property tax. However, in the past, Congress has exercised its authority to levy an apportioned tax on real property. In 1813, Congress enacted a direct tax on property totalling $3 million, which the statute apportioned among the 18 States; within each State, the statute appor 1 The discussion of constitutional sources of Federal tax power is adapted from "Federal Tax Power," CRS Report, Thomas B. Ripy, November 22, 1983. Those interested in the topic might also consult "Federal Taxation of Income, Estates, and Gifts," Boris I. Bittker, Warren Gorham and Lamont (New York, 1981); and "Basic Federal Income Taxation," Third Edition, William D. Andrews, Little Brown & Co. (Boston, 1985). tioned among the counties or parishes of that State. For example, $369,018.44 was apportioned to Virginia, and $6,354.50 of that amount apportioned to Fairfax County. (Act of August 2, 1813, 2 Stat. 53.) In 1861, Congress again enacted a direct tax on property. (Act of August 5, 1861, Section 87, 12 Stat. 295.) This measure raised a total of $20 million and was apportioned among the States, territories, and the District of Columbia. C. INCOME TAXES In 1895, the Supreme Court held that the individual income tax levied on income from property was a direct tax on property. Accordingly, the Court held that the income tax was impermissible under the Constitution unless apportioned uniformly as required by Article I, Section 9. (Pollock v. Farmers Loan and Trust Co., 157 U.S. 429, aff'd 158 U.S. 601.) The practical effect of Pollock was to bar enactment of an individual income tax until the passage of the 16th amendment to the Constitution. The constitutional bar, of course, could have been circumvented either by restricting the income tax to earned income, or by apportioning the tax among the States according to population. The first course was politically infeasible; the second administratively impractical. In February 1913, the 16th amendment to the Constitution was approved, providing: The Congress shall have power to lay and collect taxes on The Revenue Act of 1913, enacted after the effective date of the 16th amendment, provided an individual income tax which was upheld against a number of constitutional challenges in Brushaber v. Union Pacific R.R., 240 U.S. 1 (1916). D. OTHER TAXES Today, while the most significant source of Federal revenue is the individual income tax, Congress has used its taxing authority to raise revenue from a wide variety of other sources as well. Sources of Federal revenue include individual and corporate income taxes, taxes on the transfers of wealth (gift and estate taxes), payroll taxes on wages, and various excise taxes (including taxes on the production or sale of alcohol, tobacco, telephone services, gasoline, and many other articles). Tables 1 and 2 of Part IV, "Historical Tables," present current summaries of the revenue raised from each major source of Federal taxation. A listing of current Federal excise taxes and rates is included in section 5 of Part III. Generally, the Supreme Court has interpreted Congress' power to tax under Article I, Section 8 as a broad one. The Court has described this power as "exhaustive," and embracing "every conceivable power of taxation." (Brushaber, supra.) Specifically, the Court has upheld the power of Congress to tax a broad variety of activities, including transfers of wealth at death (Knowlton v. Moore, 178 |