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Before I start, I must define terms.
Direct taxation vs indirect taxation has a somewhat different meaning in the financial world, generally breaking down as taxes that can be shifted to others versus taxes that cannot be shifted to others.
But I speak of the different, Constitutional, terms.
A direct tax under the Constitution is just that, a tax levied against person or property and exists in only four forms:
1. Capitation: A tax directly and equally on every individual, perhaps $1 per head, perhaps $10 per head, perhaps much more per head.
2. Wealth: A tax levied as a universal percentage of every persons liquid wealth, perhaps 1%, perhaps much more. There is NO progression, so the hobo on the street with $10 to his name would pay the same percentage as would Elon Musk.
3: Real estate: A set percentage would be levied on all real estate in the country. Unlike State property taxes, there would be NO homestead or other exemptions and no limitations on assessments.
4. Personal property: Could take any number of forms, but again would be uniform with no exemptions or limitations.
Capitation would always be the same in every state, but rates would vary between States on the other three types, due to the apportionment requirement.
An indirect tax under the Constitution is literally everything else, encompassing every type of taxation in existence. Indirect means that a tax is targeted at the point of exchange, not directly, of which a few examples of the endless number available are:
1. Exchange of time/labor for wages, salary, etc.
2. Exchange of money for goods and services.
3. Interest, dividends and capital gains earned and paid on investments.
4. Rent deriving from real or personal property.
But this discussion pertains ONLY to direct taxation as I have defined it above.
Currently, no direct taxation exists in the United States. The last direct tax was enacted in 1861 and repealed in 1872.
The biggest obstacle to direct taxation would be the Constitutional apportionment requirement, which rendered the 1861 tax ineffective and resulted in another Revenue Bill in 1862 which relied more on indirect taxation. The difficulty of apportionment was a major reason for the final repeal in 1872 of direct taxation.
It was difficult enough in 1861. In 2025, it would be all but impossible to levy an apportioned direct tax. States with large numbers of undocumented immigrants on its census population count are going to draw a higher apportionment percentage. That would lead to endless bickering and lawsuits. Poorer States are going to bear the same per capita tax load as richer States, meaning poorer States are going to be much more negatively impacted. California and New York have much higher wealth per person than Mississippi, but the per capita burden would be the same on all States.
A capitation tax is severely regressive and not likely to be levied.
A wealth tax is neither progressive nor regressive and would likely be used to some extent in direct taxation.
A real property (estate) tax is somewhat progressive.
A personal property tax would be the only form that could be made truly progressive, by targeting specific forms of property for taxation, such as boats and RV's or other such personal property more likely to be owned by wealthier persons.
Unfortunately, to satisfy a direct tax levy, likely a combination of wealth, real and personal taxation would be needed, limiting progressivity.
The bottom line is that a direct tax would be extremely difficult to levy, would be subject to intense litigation, would unduly burden poorer States and would fall more heavily on the poorer in society than our current system of taxation.
So I oppose any scheme that would attempt to invoke Federal direct taxation. Instead, I would support thoughtful measures for change to our current Federal system of indirect taxation.
I would also note that the apportionment requirement was included as a protection for slavery. The South knew that the Federal Government could end slavery by enacting a large direct tax on slaves and land. Much more land and nearly all slaves were in the South, making it all but impossible to apportion such a tax, so the apportionment requirement was introduced.
The apportionment requirement simply makes direct taxation both difficult to enact and enforce and economically destructive for poorer States.
I deliberately omitted capitation tax from the poll as simply too ridiculously regressive to be considered.
Short of amending the Constitution to entirely remove the apportionment requirement for direct taxation, direct taxation is simply not a practical idea. Even removing apportionment, it presents no advantage to existing indirect taxation.
Direct taxation vs indirect taxation has a somewhat different meaning in the financial world, generally breaking down as taxes that can be shifted to others versus taxes that cannot be shifted to others.
But I speak of the different, Constitutional, terms.
A direct tax under the Constitution is just that, a tax levied against person or property and exists in only four forms:
1. Capitation: A tax directly and equally on every individual, perhaps $1 per head, perhaps $10 per head, perhaps much more per head.
2. Wealth: A tax levied as a universal percentage of every persons liquid wealth, perhaps 1%, perhaps much more. There is NO progression, so the hobo on the street with $10 to his name would pay the same percentage as would Elon Musk.
3: Real estate: A set percentage would be levied on all real estate in the country. Unlike State property taxes, there would be NO homestead or other exemptions and no limitations on assessments.
4. Personal property: Could take any number of forms, but again would be uniform with no exemptions or limitations.
Capitation would always be the same in every state, but rates would vary between States on the other three types, due to the apportionment requirement.
An indirect tax under the Constitution is literally everything else, encompassing every type of taxation in existence. Indirect means that a tax is targeted at the point of exchange, not directly, of which a few examples of the endless number available are:
1. Exchange of time/labor for wages, salary, etc.
2. Exchange of money for goods and services.
3. Interest, dividends and capital gains earned and paid on investments.
4. Rent deriving from real or personal property.
But this discussion pertains ONLY to direct taxation as I have defined it above.
Currently, no direct taxation exists in the United States. The last direct tax was enacted in 1861 and repealed in 1872.
The biggest obstacle to direct taxation would be the Constitutional apportionment requirement, which rendered the 1861 tax ineffective and resulted in another Revenue Bill in 1862 which relied more on indirect taxation. The difficulty of apportionment was a major reason for the final repeal in 1872 of direct taxation.
It was difficult enough in 1861. In 2025, it would be all but impossible to levy an apportioned direct tax. States with large numbers of undocumented immigrants on its census population count are going to draw a higher apportionment percentage. That would lead to endless bickering and lawsuits. Poorer States are going to bear the same per capita tax load as richer States, meaning poorer States are going to be much more negatively impacted. California and New York have much higher wealth per person than Mississippi, but the per capita burden would be the same on all States.
A capitation tax is severely regressive and not likely to be levied.
A wealth tax is neither progressive nor regressive and would likely be used to some extent in direct taxation.
A real property (estate) tax is somewhat progressive.
A personal property tax would be the only form that could be made truly progressive, by targeting specific forms of property for taxation, such as boats and RV's or other such personal property more likely to be owned by wealthier persons.
Unfortunately, to satisfy a direct tax levy, likely a combination of wealth, real and personal taxation would be needed, limiting progressivity.
The bottom line is that a direct tax would be extremely difficult to levy, would be subject to intense litigation, would unduly burden poorer States and would fall more heavily on the poorer in society than our current system of taxation.
So I oppose any scheme that would attempt to invoke Federal direct taxation. Instead, I would support thoughtful measures for change to our current Federal system of indirect taxation.
I would also note that the apportionment requirement was included as a protection for slavery. The South knew that the Federal Government could end slavery by enacting a large direct tax on slaves and land. Much more land and nearly all slaves were in the South, making it all but impossible to apportion such a tax, so the apportionment requirement was introduced.
The apportionment requirement simply makes direct taxation both difficult to enact and enforce and economically destructive for poorer States.
I deliberately omitted capitation tax from the poll as simply too ridiculously regressive to be considered.
Short of amending the Constitution to entirely remove the apportionment requirement for direct taxation, direct taxation is simply not a practical idea. Even removing apportionment, it presents no advantage to existing indirect taxation.
