Was the Supreme Court right to call Obamacare’s insurance penalty a “tax?”
Not according to the Founders.
This new article explaining just what the Constitution means by “tax” has just come out. It explains also the Constitution’s other financial terms: “Revenue,” “Excises,” “Tonnage,” “Duties,” and “Imposts.”
What follows is an excerpt of the full article, which you can download here.
I. Inferences from the Constitutional Text
The constitutional text offers hints as to the meaning of the terms examined in this study. The following discussion addresses that text as it stood at the time of the Constitution’s ratification, without the changes wrought subsequently by the Sixteenth Amendment and by court decisions.
The Constitution imposed two limits on state financial exactions: (1) a requirement of congressional consent before a state could “lay any Duty of Tonnage” and (2) with one exception, a like requirement before a state could “lay any Imposts or Duties on Imports or Exports.” The Constitution also authorized Congress to impose financial exactions. The Taxation Clause empowered Congress to “lay and collect Taxes, Duties, Imposts and Excises.” The Commerce Clause empowered Congress to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” During the founding era, commercial regulation was understood to entail financial impositions.
The Constitution qualified these grants to Congress. Among the qualifications were the following three:
- “All Bills for raising Revenue” had to originate in the House of Representatives;
- Congress could impose no “Tax or Duty” on exports; and
- until 1808, Congress was prohibited from levying any “Tax or duty” on imported slaves in excess of ten dollars per person.
In addition to these qualifications, the Constitution included several that reflected the Founders’ belief that government was a fiduciary institution, and, to the extent possible, should serve its constituents in an impartial manner. These were as follows:
- Taxes, duties, imposts, and excises were to be levied “to pay the Debts and provide for the Common Defence and general Welfare of the United States.” The Supreme Court no longer treats this as much of a restriction, but the Founders understood it to limit Congress to imposing only those taxes, etc., as would raise revenue for “general” (national) purposes rather than merely for regional or special-interest (“partial”) purposes. This provision curbed congressional taxing authority even within the scope of Congress’s enumerated powers.
- “Duties, Imposts and Excises” were to be “uniform throughout the United States.”
- The Constitution prohibited any “Preference [being] given by any Regulation of Commerce or Revenue to the Ports of one State over those of another.”
- Two clauses required that “Capitation[s]” and other “direct Taxes” be apportioned among the states according to their population, with the provisos that (1) Indians who did not pay taxes were excluded and (2) five slaves were to be counted as three free persons. These clauses were unamendable until 1808.
The terms examined in this study all occurred in the grants and limitations just summarized. “Tax,” “Duty,” “Excise,” “Impost,” and “Tonnage” occurred in the Taxation Clause. Three of those five words also appeared elsewhere in conjunctive and disjunctive expressions: “Tax or duty,” “Imposts or Duties,” “Duties and Imposts.” The phrase “direct . . . Taxes” appeared in two other locations. It is therefore reasonable to infer that, in accordance with the canon of construction against surplus, none of these individual terms was a synonym for any of the others. This does not preclude the possibility of overlap.
The Constitution usually employed the word “Duty” in the context of trade: “Duty of Tonnage,” duties on imported slaves, duties on imports and exports. We can deduce that at least some duties were commercial in nature and that they were subject to the requirement of uniformity of “Regulation[s] of Commerce or Revenue.”
The text further distinguished between “direct Taxes” and other taxes. It stated outright that a “Capitation” was a direct tax, and it implied that there were other kinds of direct tax. Only direct taxes were to be apportioned among the states by population. Other taxes, presumably indirect, were not to be apportioned. A different requirement—uniformity—applied to duties, imposts, and excises. This suggests that to the extent the latter exactions were “taxes,” they were indirect.
In sum: The text appeared to distinguish between regulations of commerce and taxes (“Revenue”); between taxes, duties, excises, and imposts; and between direct taxes and other (presumably indirect) taxes. It stated that capitations were direct and implied that there were other direct taxes as well. The text further implied that taxes in the form of duties, excises, or imposts were indirect. It stated explicitly that “duties” included “tonnage,” and it implied that duties were associated with commerce. Finally, the text imposed an apportionment rule on direct taxes and a uniformity requirement on other financial exactions.
We now turn to sources of meaning outside the text of the Constitution.