More Conflict

In a previous post, we looked at the confusion regarding income tax decisions in the First and Second Circuits. Today, we’ll see that there are conflicting opinions in the rest of the Circuits as well.

In the Fourth and Sixth Circuits, the income tax has been held to be an excise (indirect) tax.

White Packing Co. v. Robertson, 89 F.2d 775, 779 (4th Cir. 1937):

The tax is, of course, an excise tax, as are all taxes on income.

United States v. Gaumer, 972 F.2d 723, 725 (6th Cir. 1992):

Brushaber and the Congressional Record excerpt do indeed state that for constitutional purposes, the income tax is an excise tax. 

However, the Fifth, Seventh, Eighth and Tenth Circuits argue that this tax is not an excise, but rather a direct tax.

Parker v. Commissioner, 724 F.2d 469, 471 (5th Cir. 1984):

The Supreme Court promptly determined in Brushaber . . . that the sixteenth amendment provided the needed constitutional basis for the imposition of a direct non-apportioned income tax.

The sixteenth amendment merely eliminates the requirement that the direct income tax be apportioned among the states.

The sixteenth amendment was enacted for the express purpose of providing for a direct income tax.

Coleman v. Commissioner, 791 F.2d 68, 70 (7th Cir. 1986):

The power thus long predates the Sixteenth Amendment, which did no more than remove the apportionment requirement . . . .

United States v. Francisco, 614 F.2d 617, 619 (8th Cir. 1980):

The cases cited by Francisco clearly establish that the income tax is a direct tax, thus refuting the argument based upon his first theory. See Brushaber v. Union Pacific Railroad Co., 240 U.S. 1, 19, 36 S.Ct. 236, 242, 60 L.Ed. 493 (1916) (the purpose of the Sixteenth Amendment was to take the income tax 'out of the class of excises, duties and imposts and place it in the class of direct taxes’).

United States v. Lawson, 670 F.2d 923, 927 (10th Cir. 1982):

Lawson's 'jurisdictional' claim, more accurately a constitutional claim, is based on an argument that the Sixteenth Amendment only authorizes excise-type taxes on income derived from activities that are government-licensed or otherwise specially protected . . . The contention is totally without merit . . . The Sixteenth Amendment removed any need to apportion income taxes among the states that otherwise would have been required by Article I, Section 9, clause 4.

Remember, under the U.S. Constitution, the Congress is authorized to impose two different types of taxes, direct and indirect. Via Art. 1, §8, cl. 1, of the Constitution, indirect taxes (excises, duties and imposts) must be uniformly imposed throughout the country. Direct taxes are required via Art. 1, §2, cl. 3, and Art. 1, §9, cl. 4, to be imposed pursuant to the regulation of apportionment.

So, there you have it. Two of the circuit courts say the income tax is an indirect tax, which means that the income tax would have to be uniformly imposed throughout the country. In contrast, four of the circuit courts claim that the income tax is a direct tax, which requires it to be imposed based on representatives and population.