Not Written for You: The Income Tax Hidden in Plain Sight
Part 6 of 13
Two Kinds of Tax
The Constitution mentions taxation in exactly three places. Not thirty. Not three hundred. Three.
The first is Article I, Section 2, Clause 3:
The second is Article I, Section 8, Clause 1:
The third is Article I, Section 9, Clause 4:
Only one of these three provisions grants Congress any taxing power at all. The other two impose restrictions on how that power may be exercised.
Article I, Section 8, Clause 1 is the grant. It authorizes Congress to "lay and collect taxes, duties, imposts and excises." That is the full scope of the federal taxing power. Everything Congress can do in the way of taxation begins and ends in that clause.
The word "taxes" in that clause refers to direct taxes. Duties, imposts, and excises are indirect taxes. The U.S. Supreme Court has called these "the two great tax classes." There is no third class.
Direct Taxes
The Supreme Court defined direct taxes in Knowlton v. Moore, 178 U.S. 41 (1900):
A tax upon a person for simply existing is a capitation tax — a direct tax. A tax upon something you own, such as land, is a direct tax. A tax that falls upon your exercise of a constitutional right is a direct tax.
Direct taxes are subject to a mandatory rule: apportionment. Congress must divide the tax among the states according to population. Two of the three constitutional provisions quoted above exist for no other purpose than to impose that rule.
In the entire history of the United States, Congress has never enacted a direct tax. Not once. The mechanics of apportionment have never been tested in practice. We do not know precisely how such a tax would be collected, because the question has never arisen.
Indirect Taxes
An indirect tax is the opposite. It is a tax you can avoid by not engaging in a specific activity. The constitutional requirement for indirect taxes is not apportionment but uniformity — the same rate must apply everywhere in the country.
Consider a toll road. There is always an older, slower route to the same destination. If you do not wish to pay the toll, you take the other road. The toll is avoidable. That is the defining feature of an indirect tax.
The Constitution names three forms of indirect tax: duties, imposts, and excises. There is no fourth form. Customs duties are a tax on the activity of importing goods into the country. If you do not wish to pay the duty, do not import the goods. An impost is a tax on using a particular route or facility. If you do not wish to pay the impost, use the alternative.
And then there is the excise. The federal courts have defined it this way:
The key phrase is "the element of absolute unavoidable demand is lacking." If you do not engage in the privileged activity, you do not owe the tax.
Why It Matters
The distinction between direct and indirect taxes is not academic. It determines whether a tax is something you can walk away from.
A direct tax falls on you for existing, for owning property, or for exercising a right. You cannot avoid it without ceasing to exist, surrendering your property, or giving up your rights. That is why the Constitution demands apportionment — to prevent Congress from using its taxing power to burden the accumulation of wealth.
An indirect tax falls on an activity. If you do not wish to pay, do not engage in the activity. The Founders placed only one restriction on indirect taxes: uniformity. The same rate in Alabama as in Alaska.
Every tax Congress imposes must fall into one of these two classes. There is no exception. If a tax is direct, it must be apportioned. If it is indirect, it must be uniform. Those are the only two constitutional options.
So which is the income tax?
Next: The Supreme Court answered that question in 1916. Congress confirmed it in 1941, 1943, and 1980. And in 2024, the Court said it again. The income tax is an excise — a privilege tax.
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