Talk:Pollock v. Farmers' Loan & Trust Co.

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Contents 1 Removed enigmatic language 2 Phony "quote" from Brushaber 3 Note for possible expansion 4 Close, but not quite 5 Kermit Hall - Oxford Guide: Did Hall claim that the Pollock court ruled an income tax on wages to be a direct tax? 6 Still needs work

[edit] Removed enigmatic language

An anonymous user inserted the following into the article:

It should be noted that since the Brushaber case decided that taxes on incomes are excise taxes, that the rule of apportionment does not apply, but the rule of uniformity does. Enforcement of the federal income tax is therefore illegal when applied outside of federal jurisdiction.

First, the courts have indeed indicated that income taxes as a general rule are in the category of excises (as opposed to direct taxes). Under the Sixteenth Amendment, the rule of apportionment does not apply to income taxes. It is also correct to say that the rule of uniformity does apply to excises and therefore, presumably, to income taxes as a general proposition. All this is pretty much already covered in the articles on Pollock and Brushaber and the Sixteenth Amendment, in one form or another. It's unclear why this repetitive material was inserted.

The statement that "Enforcement of the federal income tax is therefore illegal when applied outside of federal jurisdiction" is both ambiguous and from a legal standpoint a non sequitur. The main thrust of the Pollock and Brushaber cases had little to do with "federal jurisdiction," and neither case including any ruling about enforcement of the federal income tax being "illegal" when applied "outside of federal jurisdiction." Unverifiable, and original research (incorrect at that) -- removed. Yours, Famspear 02:16, 26 October 2006 (UTC)

[edit] Phony "quote" from Brushaber

Dear fellow editors: An anonymous user inserted the following:

There are three important cases in more recent times, all pertaining to the 16th Ammendment, which some say was never properly ratified. That point is moot however. In the Brushaber v. Union Pacific Railroad case, the court said: "The 16th Amendment as correctly interpreted, is limited to indirect taxes and for that reason is constitutional ... "

I have searched the text of the Brushaber decision and I cannot find the "quotation."

The references to Stanton v. Baltic Mining and Eisner v. Macomber that were inserted into the article are simply not on point. I believe that both of these cases are already covered at Tax protester constitutional arguments. The effect of the Pollock holding -- that taxes on income from property were to be required to be apportioned after 1895 -- was negated by the Sixteenth Amendment. Yours, Famspear 18:32, 1 November 2006 (UTC)

[edit] Note for possible expansion

This article can be expanded in the future to clearly summarize this case by separating the holdings in the original opinion from those in the rehearing opinion (both rendered in 1895). Especially, we can go into more depth on the separate holding on the interest income from state & municipal bonds, and how that holding has been affected in subsequent court cases. Famspear 17:35, 15 January 2007 (UTC)

After speding some time reading the wiki article on the Pollock case, and reading the actual decision here: http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=157&invol=429#f1 I noticed also that a major aspect of the decision in the Pollock case was with regards to Federal taxes imposed on State governments (in the Pollack case, this was with regard to state and municipal bonds). There seems to be no mention of this aspect of the decision in the wiki article whatsoever.

After looking at this aspect of the Pollock case, some questions arose for me with regards to the taxing power of the Federal government:

-Does the Constitution prior to the sixteenth amendment give the power to the Federal Government to tax State Governments? -Does the sixteenth amendment give the power to the Federal Government to tax state governments (all incomes, from whatever source derived)? -Why does the Federal Government's (Congress') power to impose direct taxes not supercede the power of State Government's power to impose direct taxes? (Do State Governments have all the powers that the Federal Government has?)Rag-time4 21:09, 10 October 2007 (UTC)

[edit] Close, but not quite

For the reasons stated below, the following language is incorrect, and is being modified:

"The Court in Brushaber also noted that before Pollock, taxes on income from professions, trades, employments or vocations were excises, even if direct in substance, as they were indirect in form [ . . . ]"

Yes, that type of income is indirect in form. However, the Brushaber court did not note that taxes excises on income from professions, trades, employments, or vocations were "direct in substance." The "direct in substance" treatment applied to income from property -- and that was in the Pollock case, not the Brushaber case (although the Brushaber case of course discussed what the court had decided in Pollock). The term "direct" as used in these cases refers to direct taxes in the constitutional sense -- meaning taxes on property by reason of its ownership, and taxes in the form of capitations. Both the Pollock court and the Brushaber court considered income from professions, etc., to be an excise (an indirect tax) in both form and substance, not merely in form.

Again, the "in substance" treatment applies to the Pollock court's treatment of taxes on income from property. Taxes on income from property (such as taxes on interest, dividends, and rent) were considered indirect in form -- but direct in substance -- by the Pollock court. The Sixteenth Amendment simply removed the requirement -- with respect to any income tax on any income from any source -- that we even consider the direct-indirect issue. After the Sixteenth Amendment, Congress can impose any income tax without any apportionment requirement -- even if that tax would have been considered "direct" by the Pollock court. Yours, Famspear 20:17, 19 January 2007 (UTC)

Post-script: Here is the exact language from Brushaber:

[ . . . ] the conclusion reached in the Pollock Case did not in any degree involve holding that income taxes generically and necessarily came within the class of direct taxes on property, but, on the contrary, recognized the fact that taxation on income was[,] in its nature[,] an excise entitled to be enforced as such [i.e., entitled to be enforced as an excise, and thus not subject to the apportionment rule,] unless and until it was concluded that to enforce it [to enforce a particular kind of income tax] would amount to accomplishing the result which the requirement as to apportionment of direct taxation was adopted to prevent, in which case the duty would arise to disregard form and consider substance alone, and hence subject the tax to the regulation as to apportionment which otherwise[,] as an excise[,] would not apply to it. [bolding and bracketed language added by Famspear]

Nothing in the quoted language says that the Pollock court -- or the Brushaber court or any other court -- ever treated taxes on income from professions, employment, etc., as "direct in substance." Read the following Brushaber language:

Nothing could serve to make this clearer than to recall that in the Pollock Case, in so far as the law taxed incomes from other classes of property than real estate and invested personal property, that is, income from 'professions, trades, employments, or vocations', its validity was recognized; indeed, it was expressly declared [in Pollock] that no dispute was made upon that subject, and attention was called to the fact that taxes on such income [from employment, etc.] had been sustained as excise taxes in the past. Id. p. 635. The whole law was, however, declared unconstitutional on the ground that to permit it [the law] to thus operate would relieve real estate and invested personal property from taxation and 'would leave the burden of the tax to be borne by professions, trades, employments, or vacations; and in that way what was intended as a tax on capital would remain, in substance, a tax on occupations and labor' ( id. p. 637),-a result which, it was held, could not have been contemplated by Congress. [bolding and bracketed language added by Famspear]

In other words, the Brushaber court is pointing out that in Pollock, the reason the entire 1894 statute was thrown out by the Pollock court was NOT that the Pollock court considered taxes on income from employment to be "direct in substance" (the direct in substance holding applied in Pollock to taxes on income from property, not on income from employment). The reason the Pollock court threw out the entire statute was that the court saw that Congress had not intended to write a statute that would tax incomes from employment, labor, occupations, etc., without also taxing incomes from property.

Again, Pollock and Brushaber are complex cases with complex, archaic, convoluted legal language -- another reason why the Wikipedia policy against original research by Wikipedia editors may be a good idea. Yours, Famspear 20:50, 19 January 2007 (UTC)

[edit] Kermit Hall - Oxford Guide: Did Hall claim that the Pollock court ruled an income tax on wages to be a direct tax?

I have reverted an anonymous user's additions to the effect that the Pollock court somehow determined that a tax on wages was a direct tax. I stated that there was no sourcing for this, but I now notice that the user cited Kermit Hall's Oxford Guide. However, the citation appears to be incomplete. We would need a page number, etc. Also, if Kermit Hall actually said that the Pollock court ruled that a tax on wages was a direct tax on property, that would indeed be an astounding statement that could be added to the article. It would be an incorrect statement -- but it could be noted in the article if Hall actually said it.

At any rate, I took the general reference to Kermit Hall as an incomplete citation and I therefore treated the material as unsourced. I apologize if I acted to hastily (i.e., if it turns out that Hall's material actually supports the statement).

Does anyone have ready access to this work? Famspear 16:46, 17 October 2007 (UTC)

Here is an excerpt from the text of the second Pollock decision (the decision on the rehearing):

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.

Being of opinion that so much of the sections of this law as lays a tax on income from real and personal property is invalid, we are brought to the question of the effect of that conclusion upon these sections as a whole.

It is elementary that the same statute may be in part constitutional and in part unconstitutional, and, if the parts are wholly independent of each other, that which is constitutional may stand, while that which is unconstitutional will be rejected. And in the case before us there is no question as to the validity of this act, except sections 27 to 37, inclusive, which relate to the subject which has been under discussion; and, as to them, we think the rule laid down by Chief Justice Shaw in Warren v. Charlestown, 2 Gray, 84, is applicable,-that if the different parts 'are so mutually connected with and dependent on each other, as conditions, considerations, or compensations for each other, as to warrant a belief that the legislature intended them as a whole, and that if all could not be carried into effect the legislature would not pass the residue independently, and some parts are unconstitutional, all the provisions which are thus dependent, conditional, or connected must fall with them.' [ . . . ]

[ . . . ] it is obvious that [ the . . . ] largest part of the anticipated [tax] 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. [ . . . ]

Our conclusions may therefore be summed up as follows:

First. We adhere to the opinion already announced,-that, taxes on real estate being indisputably direct taxes, taxes on the rents or income of real estate are equally direct taxes.

Second. We are of opinion that taxes on personal property, or on the income of personal property, are likewise direct taxes.

Third. The tax imposed by sections 27 to 37, inclusive, of the act of 1894, so far as it falls on the income of real estate, and of personal property, being a direct tax, within the meaning of the constitution, and therefore unconstitutional and void, because not apportioned according to representation, all those sections, constituting one entire scheme of taxation, are necessarily invalid.

--Pollock, 157 US. 429 (1895) (bolding added by Famspear).

Notice that the Court said nothing about taxes on incomes from "business, privileges, employments, and vocations" being direct taxes. The Court referred to those as excises (indirect taxes), but struck down the entire law -- for the reason given in the text: that when Congress passed this particular Act (the 1894 Act), the Congress had not intended to tax only incomes from employments and professions while exempting incomes from real estate and personal property. Yours, Famspear 17:11, 17 October 2007 (UTC)

Famspear, if taxes on wages are excises, then they were not required to be apportioned, right? Thus, the last sentence of the introduction seems to be in need of revision, since it states that the sixteenth amendment removed the apportionment requirement from the taxation of incomes. Rag-time4 03:20, 20 October 2007 (UTC)

Dear Rag-time4: No, forget about wages for a minute. Remember what the Pollock case is talking about: taxes on interest, dividends, and rents (not taxes on wages). Remember, the Pollock decision was about a new policy, in the year 1895, of treating taxes on interest, dividends and rent (which, like taxes on wages, had always previously been considered excises, or indirect taxes) as direct taxes.

As a general statement (which is what it is), the statement that Sixteenth Amendment removed the apportionment requirement for income taxes is a correct statement. It's just that the apportionment requirement (the one imposed beginning in 1895 by the Pollock court) applied ONLY to CERTAIN income taxes -- namely taxes on interest, dividends and rent.

Think of it this way.

Suppose Country X allows people to sell any Toyota automobile in Country X. Then, one day in the year 1995, the Supreme Court in Country X rules that Toyota Camry automobiles can be sold in Country X only if the Camry is colored red. There's no restriction of any kind for Toyota Corolla (or for any other kind of Toyota) - just a restriction that says a Camry has to be red.

A few years later in the year 2007, Country X ratifies a constitutional amendment that says: "Any Toyota can be sold in Country X, regardless of color." The 2007 law REMOVED THE COLOR RESTRICTION FOR TOYOTAS. It's just that the color restriction applied only to Camrys, and only for the years from 1995 to 2007. The restriction never applied to Corollas - either before 1995, or between 1995 and 2007, or after 2007. It just never applied to Corollas, ever.

Now, think of the category of "Toyota" as the same as the category "income tax."

In the same way, as far as "income taxes" were concerned, the "apportionment restriction" applied only to income taxes on interest, dividends and rents (the Camrys, if you will). The apportionment restriction never applied to any other kind of income taxes (never applied to income taxes on wages -- the Corollas, so to speak). But it is still technically grammatically and legally correct to say that the new law removed the color requirement for "Toyotas" -- just as the Sixteenth Amendment removed the apportionment requirement for "income taxes." Look at the language of the Amendment again.

Saying that the the Amendment removed the apportionment requirement for "income taxes" is not the same as saying -- and does not imply -- that the apportionment requirement had previously applied to "income taxes on wages." Yours, Famspear 05:13, 20 October 2007 (UTC)

[edit] Still needs work

I have made some corrections to material that had been introduced by an anonymous user. This article still needs work as we might want to distinguish more clearly between the two opinions rendered in Pollock (the original opinion and the opinion on rehearing). Right now it's not clear from the article which holdings go with which opinions. Stay tuned. Famspear (talk) 16:41, 24 March 2008 (UTC)