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. These tax categories are mutually exclusive and any given tax must squarely fit within one category or the other.

 In 1894, Congress adopted an income tax act which was declared unconstitutional in Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429, 15 S.Ct. 673, aff. reh., 158 U.S. 601, 15 S.Ct. 912 (1895). The Pollock Court found that the income tax was a direct tax which could only be imposed if the tax was apportioned; since this tax was not apportioned, it was found unconstitutional. In an effort to circumvent this decision, the 16th Amendment was proposed by Congress in 1909 and allegedly ratified by the states in 1913. As a result, various opinions arose regarding the legal effect of the amendment. Some factions contended that the 16th Amendment simply eliminated the apportionment requirement for one specific direct tax known as the income tax, while others asserted that the amendment simply withdrew it from the direct tax category and placed the income tax in the indirect, excise tax class. These competing contentions and interpretations were apparently resolved in Brushaber v. Union Pacific Railroad Co., 240 U.S. 1, 36 S.Ct. 236 (1916).[1] Rather than attempt a determination of what the Court held in this case, it is more important to learn what various courts have subsequently declared Brushaber to mean.

A little more than a week after the opinion in Brushaber, similar issues were present for decision in Stanton v. Baltic Mining Co., 240 U.S. 103, 112-13, 36 S.Ct. 278 (1916), which involved the question of whether an inadequate depletion allowance for a mining company constituted a direct tax on the company's property. As to Baltic's contention that "the 16th Amendment authorized only an exceptional direct income tax without apportionment," the Court rejected it by stating that this contention:

"... manifestly disregards the fact that by the previous ruling it was settled that the provisions of the 16th Amendment conferred no new power of taxation, but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged, and being placed in the category of direct taxation."

The Court clearly held that income taxes inherently belonged to the indirect/excise tax class, but had been converted by Pollock to direct taxes by considering the source of the income; the 16th Amendment merely banished the rule in Pollock. See also Tyee Realty Co. v. Anderson, 240 U.S. 115, 36 S.Ct. 281 (1916), decided the same day.

However, the victory of defining what the 16th Amendment meant was short lived and later decisions commenced a course which appears to have changed the meaning of Brushaber. In William E. Peck and Co. v. Lowe, 247 U.S. 165, 172-73, 38 S.Ct. 432, 433 (1918), which involved a tax imposed on export earnings, the Court seemed to indicate that what was accomplished by the amendment was the elimination of the apportionment requirement for the direct tax known as the income tax, an argument rejected in Baltic:

"The Sixteenth Amendment, although referred to in argument, has no real bearing and may be put out of view. As pointed out in recent decisions, it does not extend the taxing power to new or excepted subjects, but merely removed all occasion, which otherwise might exist, for an apportionment among the states of taxes laid on income, whether it be derived from one source or another."

The drift by the Court away from the position that the income tax fell within the excise tax category became complete with the decision in Eisner v. Macomber, 252 U.S. 189, 206, 40 S.Ct. 189 (1920), which involved the application of this tax to a stock dividend. Here, the Court plainly stated what many lawyers and some judges today think was accomplished by means of this amendment: the elimination of the apportionment requirement for the direct tax known as the income tax. In deciding this case, the Court quoted the amendment and then d that barrier."

InParker v. Commissioner, 724 F.2d 469, 471 (5th Cir. 1984), the court clearly rejected the contention that this tax is an excise:

"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."

In Coleman v. Commissioner, 791 F.2d 68, 70 (7th Cir. 1986), the court held that an argument that this tax was an excise was frivolous on its face ("The power thus long predates the Sixteenth Amendment, which did no more than remove the apportionment requirement...").

In United States v. Francisco, 614 F.2d 617, 619 (8th Cir. 1980), that court declared that Brushaber held this tax to be a direct one:

"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')."

Finally, in United States v. Lawson, 670 F.2d 923, 927 (10th Cir. 1982), that court expressed in the following fashion its contempt for the contention that the federal income tax was an indirect excise tax:

"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."

Therefore, while the Supreme Court rejected in Baltic the argument that "the 16th Amendment authorized only an exceptional direct income tax without apportionment," this position now prevails in most of the federal appeals courts.

A direct tax applies to and taxes property while an indirect, excise tax is never imposed on property but usually an event such as sales; see Bromley v. McCaughn, 280 U.S. 124, 50 S.Ct. 46, 47 (1929).[2] The courts which now hold that an income tax is a direct property tax believe that income is property.[3].

Income is property according to St. Louis Union Trust Co. v. United States, 617 F.2d 1293, 1301 (8th Cir. 1980). Accrued wages and salaries are likewise property; see Sims v. United States, 252 F.2d 434, 437 (4th Cir. 1958), aff'd., 359 U.S. 108, 79 S.Ct. 641 (1959); and Kolb v. Berlin, 356 F.2d 269, 271 (5th Cir. 1966).Even private employment and a profession are considered property; see United States v. Briggs, 514 F.2d 794, 798 (5th Cir. 1975). In James v. United States, 970 F.2d 750, 755, 756 n. 11 (10th Cir. 1992), the 10th Circuit made it clear that income is property. Pursuant to United States v. Lawson, supra, the Tenth Circuit declares that the property known as income is subject to tax under the view that the 16th Amendment eliminated the apportionment requirement for a specific class of property known as income.

See Eliasberg Bros. Mercantile Co. v. Grimes, 204 Ala. 492, 86 So. 56, 58 (1920); State v. Pinder, 108 A. 43, 45 (Del. 1919); Bachrach v. Nelson, 349 Ill. 579, 182 N.E. 909 (1932); Opinion of the Justices, 220 Mass. 613, 108 N.E. 570 (1915); Trefry v. Putnam, 227 Mass. 522, 116 N.E. 904 (1917); Maguire v. Tax Comm. of Commonwealth, 230 Mass. 503, 120 N.E. 162, 166 (1918); Hart v. Tax Comm., 240 Mass. 37, 132 N.E. 621 (1921); In re Ponzi, 6 F.2d 324 (D.Mass. 1925); Kennedy v. Comm. of Corps. & Taxation, 256 Mass. 426, 152 N.E. 747 (1926); In re Opinion of the Justices, 266 Mass. 583, 165 N.E. 900, 902 (1929); Hutchins v. Comm. of Corps. & Taxation, 272 Mass. 422, 172 N.E. 605, 608 (1930); Bryant v. Comm. of Corps. & Tax'n., 291 Mass. 498, 197 N.E. 509 (1935); Culliton v. Chase, 174 Wash. 363, 25 P.2d 81, 82 (1933); Jensen v. Henneford, 185 Wash. 209, 53 P.2d 607 (1936); State ex rel Manitowoc Gas Co. v. Wisconsin Tax Comm., 161 Wis. 111, 152 N.W. 848, 850 (1915); and State ex rel Sallie F. Moon Co. v. Wisconsin Tax Comm., 166 Wis. 287, 163 N.W. 639, 640 (1917).

 There appears to be no dispute about the plain requirements of the Constitution that direct taxes must be apportioned and that indirect taxes must be uniform. Likewise as shown above, there is a line of decisional authority regarding the generally accepted proposition that income is property.

END NOTES:

[1] In this decision, there is a very lengthy sentence which contains the following phrase: "... by which alone such taxes were removed from the great class of excises, duties and imposts subject to the rule of uniformity, and were placed under the other or direct class," 240 U.S., at 19. This phrase and the one at the very end of this paragraph are almost identical. This language was used to describe the contention the Court was rejecting, not approving.

[2] The Court defined these two types of taxes in the following manner: "While taxes levied upon or collected from persons because of their general ownership of property may be taken to be direct.... a tax imposed upon a particular use of property or the exercise of a single power over property incidental to ownership, is an excise which need not be apportioned..."

[3] At least one court has declared that the term "income" is not defined in the Internal Revenue Code; see United States v. Ballard, 535 F.2d 400, 404 (8th Cir. 1976).