Before the adoption of the 16th Amendment, the Supreme Court had only two occasions to address the constitutionality of a federal income tax. In Springer v. U.S., 102 U.S. 586 (1880), the plaintiff argued that the Civil-War era income tax was a direct tax that had to be apportioned, and that since it obviously wasn't aportioned, it was unconstitutional. The procedural posture of the case was that Springer had refused to pay $4,800 in income tax and that the government had levied on some real estate of his and bought it at a foreclosure sale. Springer then brought a suit against the government for possession of the land, alleging the illegality of the tax by which the property had been foreclosed on.Colonel_Buck wrote:For those of us who have an IQ of 47 and who are not lawyers, would you mind going into a little more detail on the above? TIA.Let's not forget that income taxes on wages and personal earnings have never had to be apportioned,
The Court held that the only direct taxes under the Constitution were capitation taxes and taxes on land, and that the income tax in question was neither, but was in the nature of an excise or duty, neither of which need to be apportioned. It is interesting that the Court never mentioned the type of income Springer had earned, but given the rationale for the decision, it wasn't necessary. In the Pollock case (discussed below), it was revealed that Springer's income consisted of personal earnings from his law practice and interest on government bonds.
The Court also rejected Springer's arguments based upon the theories of Adam Smith and other economists that the income tax was a direct tax.
The second case was Pollock v. Farmers' Loan and Trust Co., 157 U.S. 429 (1895) and 158 U.S. 601 (1895). In this case, the Court modified its holding in Springer that only capitation and real estate taxes were direct taxes under the Constitution and held that a tax on the income from real and personal property was a tax on the property itself and was therefore a direct tax. Significantly, however, the Court did not overrule Springer, but merely noted
The Court was careful to distinguish between a tax on the income from property and a tax on personal earnings, and in language that was admittedly dicta made it clear that the Court felt that an income tax on personal earnings was not a direct tax:While this language [that the income tax was in the nature of an excise or duty] is broad enough to cover the interest as well as the professional earnings, the case would have been more significant as a precedent if the distinction had been brought out in the report and commented on in arriving at judgment, for a tax on professional receipts might be treated as an excise or duty, and therefore indirect, when a tax on the income of personalty might be held to be direct.
In summary, there is no judicial authority whatsoever for the proposition that an income tax on personal earnings is a direct tax. To the contrary, Springer stands for exactly the opposite: a tax on personal earnings is an excise or duty that does not have to be apportioned.We have considered the act only in respect of the tax on income derived from real estate, and from invested personal property, and have not commented on so much of it as bears on gains or profits from business, privileges, or employments, in view of the instances in which taxation on business, privileges, or employments has assumed the guise of an excise tax and been sustained as such...
According to the census, the true valuation of real and personal property in the United States in 1890 was $65,037,091,197, of which real estate with improvements thereon made up $39,544,544,333. Of course, from the latter must be deducted, in applying these sections, all unproductive property and all property whose net yield does not exceed $4,000; but, even with such deductions, it is evident that the income from realty formed a vital part of the scheme for taxation embodied therein. If that be stricken out, and also the income from all invested personal property, bonds, stocks, investments of all kinds, it is obvious that by far the largest part of the anticipated revenue would be eliminated, and this would leave the burden of the tax to be borne by professions, trades, employments, or vocations; and in that way what was intended as a tax on capital would remain, in substance, a tax on occupations and labor. We cannot believe that such was the intention of congress. We do not mean to say that an act laying by apportionment a direct tax on all real estate and personal property, or the income thereof, might not also lay excise taxes on business, privileges, employments, and vocations. But this is not such an act, and the scheme must be considered as a whole.
You can read the three decisions here:
Springer: http://caselaw.lp.findlaw.com/cgi-bin/g ... &invol=586
Pollock I: http://caselaw.lp.findlaw.com/scripts/g ... &invol=429
Pollock II: http://caselaw.lp.findlaw.com/scripts/g ... &invol=601