CASES ON FEDERAL TAXATION CHAPTER I CONSTITUTIONAL ASPECTS OF THE POLLOCK v. FARMERS' LOAN AND TRUST CO. (Supreme Court of the United States, 1895. 157 U. S. 429, 158 U. S. 601, 15 Sup. Ct. 673, 912, 39 L. ed. 759, 1108, 3 Am. Fed. Tax R. 2557, 2602.) Appeal from the Circuit Court of the United States for the Southern District of New York. The act of August 27, 1894 (28 Stat. 509, c. 349), imposed a tax of 2 per cent upon incomes of more than $4,000 received by citizens of the United States, all persons residing therein, and all corporations and associations, with certain exceptions. One Pollock, a stockholder of the defendant company, filed a bill to enjoin the defendant from paying the tax, on the ground that the provisions of the act in this respect were unconstitutional. The income of the defendant was alleged to be derived from investments in real estate, in bonds of the city of New York, and in corporate bonds and stock. Demurrer was sustained, and this appeal allowed. FULLER, C.J. . The Constitution provides that representatives and direct taxes shall be apportioned among the several states according to numbers, and that no direct tax shall be laid except according to the enumeration provided for; and also that all duties, imposts, and excises shall be uniform throughout the United States. Thus, 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. The rule of uniformity was not prescribed to the exercise of the power granted by the first paragraph of section 8, to lay and collect taxes, because the rule of apportionment as to taxes had already been laid down in the third paragraph of the second section. The first question to be considered is whether a tax on the rents or income of real estate is a direct tax within the meaning of the Constitution. Ordinarily all taxes paid primarily by persons who can shift the burden upon some one else, or who are under no legal compulsion to pay them, are considered indirect taxes; but a tax upon property-holders in respect of their estates, whether real or personal, or of the income yielded by such estates, and the payment of which cannot be avoided, are direct taxes. Nevertheless, it may be admitted that, although this definition of direct taxes is prima facie correct, and to be applied in the consideration of the question before us, yet the Constitution may bear a different meaning, and such different meaning must be recognized. But in arriving at any conclusion upon this point, we are at liberty to refer to the historical circumstances attending the framing and adoption of the Constitution as well as the entire frame and scheme of the instrument, and the consequences naturally attendant upon the one construction or the other. We inquire, therefore, what, at the time the Constitution was framed and adopted, were recognized as direct taxes? What did those who framed and adopted it understand the terms to designate and include? (Here follow references to proceedings in the convention, and to the debates in the states when the Constitution was submitted for ratification.). In Hylton v. United States, 3 Dall. 171, decided in March, 1796, Mr. Justice Chase said that he was inclined to think, but of this he did not “give a judicial opinion," that "the direct taxes contemplated by the Constitution, are only two, to wit, a capitation, or poll tax, simply, without regard to property, profession, or any other circumstance; and a tax on land"; and that he doubted "whether a tax, by a general assessment of personal property, within the United States, is included within the term 'direct tax.'" But he thought that "an annual tax on carriages for the conveyance of persons may be considered as within the power granted to Congress to lay duties. The term 'duty' is the most comprehensive next to the generical term |