Brief History of Income Taxes in the United States

The door was opened in America for an income tax in 1794 with the passage of the Carriage Tax, a tax collected directly from the owners of carriages and thus a direct tax subject to apportioning pursuant to two clauses of the Constitution (Art 1, Sec. 2, Clause 3, Art. I, Sec. 9, Clause 4). The majority Federalist Congress didn’t bother to apportion the tax, calling it an excise tax levied on the use of the carriage rather than on the owner, who was nevertheless required to pay. By this simple act of palpable deceit, the twin apportionment requirements were essentially abrogated. Alexander Hamilton orchestrated the chicanery that turned a direct tax into an excis. As Washington’s Secretary of the Treasury, Hamilton proposed the tax and steered it through Congress After he retired to the most powerful lawyer in private practice in America, Hamilton was hired to represented the United States when the tax was challenged as unconstitutional.

The case known as Hylton v. United States, 3 U.S. 171 (1796), became the first case in which the Supreme Court was asked to determine whether an act of Congress was constitutional. In what was surely the most egregious decision of the Supreme Court until in the Dred Scott it concluded that slaves were property, not people, the Court in Hylton agreed with Hamilton’s argument that the palpably direct Carriage tax was an excise tax not subject to apportionment.

Subsequently, several direct taxes masquerading as excises were passed by Congress, and the Lincoln’t 1862 Income Tax–direct because taken directly from taxpayers–sailed through Congress as an excise tax without challenge in the courts. Wars have a way of subverting rights on the grounds of necessities.

If anyone would like to know more about the Hylton case, read the majority opinion Pollock v. Farmers’ Loan & Trust Company, 157 U.S. 429 (1895), affirmed on rehearing, 158 U.S. 601 (1895 ), in which the Supreme Court ruled that the unapportioned income taxes on interest, dividends and rents imposed by the Income Tax Act of 1894 were, in effect, direct taxes, and were unconstitutional because they violated the provision that direct taxes be apportioned. This rare courageous decision by the Court was eventually abrogated when the Progressive Movement successful adopted the 16th Amendment{

“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

With that Americans’ best defense against excessive taxation, the apportionment requirement, was all but permanently abolished.