The United States Constitution has, since 1788, prohibited the federal government from imposing a “direct […] Tax” “unless in the Proportion to the Census of Enumeration herein before directed to be taken.” U.S. Constitution, Article I, Section 9. In 1913, the Constitution was amended to allow the United States to tax “incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” U.S. Constitution, Amendment XVI. In Moore v. United States, decided on June 20, 2024, the Court ruled that Congress may enact tax laws that attribute a corporation’s undistributed income to the corporation’s shareholders for the purpose of collecting “income” taxes from the shareholders. The Court claimed that Congress has a long history of enacting such “attribution” laws, and that that history defines the reach of the 16th Amendment. The vote on the Court was 7-2, although only a bare majority of five Justices agreed with the Court’s rational. Justices Barrett and Alito reluctantly concurred in the result only, finding an obscure and extremely complicated tax on foreign investments Constitutional on the basis of certain counsel admissions in open court. Justices Thomas and Gorsuch dissented, complaining that the 16th Amendment does not permit a finding of “income” by attribution of undistributed corporate earnings, and that the tax on foreign investments was therefore an unapportioned “direct tax” on property (i.e., stock in a corporation) in violation of Article I, Section 9 of the Constitution.
Comment: The Court’s, and the dissents’ analysis of the Constitution’s tax provisions gave short shrift to another Constitutional provision governing federal taxing power. Article I, Section 8 of the Constitution authorizes Congress to impose “Duties, Imposts and Excises” on the people, subject only to the condition that all such charges “shall be uniform throughout the United States.” By 1788, when that provision was adopted, the word “excise” was widely used to identify a “tax levied upon commodities.”[1] Commodities are economically valuable items of property not attached to real estate.[2] The Constitution plainly authorizes the imposition of “excises” on a nationwide basis of uniformity, as opposed to a proportional basis rooted in census numbers. The dissenting Justices were wrong in questioning the Constitutionality of a federal tax on shares of stock.
Dan Rhea
[1] Oxford English Dictionary, s.v. “excise (n.), sense 2.a,” September 2023, https://doi.org/10.1093/OED/4334695936 (quoting Samuel Johnson’s Dictionary of English Language from 1755).
[2] Merriam-Webster’s Unabridged Dictionary, s.v. “commodity,” accessed July 12, 2024, https://unabridged.merriam-webster.com/unabridged/commodity.
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