Jon Elswick/AP Photo
Supreme Court of the United States, Washington, D.C., April 2019
For constitutional originalists, it’s crucial to get your history right. This is especially important when little-known provisions of the Constitution are invoked to resolve hot-button issues of contemporary importance.
The perils of bad history are on vivid display in recent high-visibility critiques of Bernie Sanders and Elizabeth Warren for their proposed wealth taxes on the super-rich. In a recent New York Times op-ed, Professors Daniel Hemel and Rebecca Kysar assert that these wealth tax initiatives violate a constitutional provision that was part the founders’ notorious compromise on slavery.
To seduce the South into the Union, the Philadelphia Convention authorized the Southerners to add three-fifths of their slaves when reapportioning their representation in the House and Electoral College after each census. That concession meant that the North would have the House and presidency stacked against it, making it very tough to restrict slavery for many generations to come.
In exchange for these devastating concessions, the convention offered the North a consolation prize. They could use their limited political leverage to get Congress to pass a tax package that would require the South to pay a bigger share of the total bill. While other taxes had to be “uniform throughout the United States,” the founders added a special provision authorizing the government to impose a head tax that would hit each slave at the same rate as each free citizen. Since slaves represented 30 to 40 percent of the population in the South but only a small share in the North, these head taxes would have a disproportionate impact on Southern whites.
This part of the deal only took final form at the convention’s mop-up session of September 14, as the delegates were heading toward the exit. While the terms of the “capitation” tax on slaves had been up for grabs during the preceding weeks, it was only then that George Read of Delaware moved to add the three words “Capitation and other direct, taxes” to the final draft, explaining that “[h]e was afraid that some liberty might otherwise be taken” to manipulate the terms of the deal. Since the convention had lots of other compromises to make as they rushed out the door, Read’s last-minute addition was accepted without further debate. Yet it is precisely these three words—“other direct taxes”—which Hemel and Kysar propose to weaponize in their constitutional campaign against the wealth tax.
Yet the “original understanding” of this provision refutes their interpretation of this formula. The meaning of “other direct taxes” was the very first high-visibility question presented to the Supreme Court in 1796. Newspaper coverage was intense, as the country considered how the Court would handle its constitutional responsibilities. (This was seven years before John Marshall handed down his famous opinion in Marbury v. Madison, the first case in which the Court asserted the power of judicial review.)
The justices responded in Hylton v. United States by unanimously rejecting an expansionary reading of the “other-clause,” with the principal opinion by Justice Chase insisting that the “rule of apportionment [by population] is only to be adopted in such cases where it can reasonably apply.”
Although Hemel and Kysar reluctantly recognize this point, they try to trivialize its significance by recruiting Alexander Hamilton to their side. To assess their maneuver, here are a few facts. Hylton involved a direct tax that Congress had imposed on luxury carriages. Since these expensive vehicles were concentrated in a few commercial centers, treating this tax as if it were a “direct tax” would not have imposed a disproportionate burden on the slave states, as originally intended. Instead, turning it into a “direct tax” would have hit the relatively poor states, both North and South, where luxury vehicles were rarely to be found.
In response to this obvious injustice, Congress followed the “rule of reason” and invoked its broad constitutional power to impose all “indirect” taxes on a national basis, requiring carriage-owners to pay the same amount without regard to their particular state of residence.
Alexander Hamilton served as the principal lawyer defending this congressional decision when it was challenged before the Court. In making his case, however, he engaged in a characteristic lawyerly maneuver. Rather than inviting the justices to announce broad principles in their maiden constitutional voyage, he urged them to stick to the particular problem at hand. He emphasized that the carriage tax did not involve “general assessments … on the whole property of individuals,” but only targeted a single asset. As a consequence, the Court could uphold Congress’s decision in this particular case without definitively resolving the larger question whether a more comprehensive impost might qualify as a “direct tax.”
Hemel and Kysar seize upon Hamilton’s lawyerly maneuver and use it as decisive evidence that the founders believed that a “general assessment” on overall wealth required state-by-state apportionment. They fail to mention, however, that none of the justices unequivocally endorsed Hamilton’s position in their opinions. Moreover, the Court included two leading members of the Constitutional Convention and one signer of the Declaration of Independence. Indeed, their self-conscious refusal to sign on to Hamilton’s position argues against, not for, the Hemel-Kysar effort to make Hamilton’s extreme view central to the original understanding. Perhaps Lin-Manuel Miranda should consider making the justices’ dramatic rejection of Hamilton into a sequel to his Broadway success.
Nevertheless, the critics might be able to salvage their position if Hylton’s “rule of reason” had provoked intense opposition throughout the country. Instead, the decision generated a wave of popular support. Only one year passed before Congress enacted the nation's first wealth tax, imposing progressive rates on recipients of legacies and owners of shares in insurance companies and banks.
Given the Court’s recent decision in Hylton, these taxes did not provoke litigation, since they were sure losers. But over the course of the 19th century, nationwide taxes on both income and wealth repeatedly drove taxpayers to the courts, only to find the justices consistently upholding their constitutionality. As a consequence, the drafters of the 14th and 15th Amendments saw no need to repeal the apportionment requirement for “other direct taxes” when they swept away every other textual expression of the founding compromise with slavery during Reconstruction.
In 1881, the justices upheld the decision by Congress to continue imposing income taxes even after the Civil War emergency had passed. It unanimously rejected the inevitable complaint that they involved “direct” taxation. Relying explicitly on Hylton, the Court could not have been more explicit: “Our conclusions are, that direct taxes, within the meaning of the Constitution, are only capitation taxes, as expressed in that instrument, and taxes on real estate”—and nothing else.
Yet 14 years later, five of the justices defied a century of precedent in their 1895 decision in Pollack v. Farmers’ Loan and Trust, striking down a new congressionally enacted income tax. By the narrowest majority, they dramatically expanded the scope of the “direct tax” provision. As in the contemporaneous case of Plessy v. Ferguson, Justice John Marshall Harlan issued an emphatic dissent denouncing the majority for reinvigorating the nation’s constitutional legacy of slavery. But while his great dissent in Plessy was ignored, his eloquent opinion in Pollock helped provoke a broad-based movement demanding a return to Hylton’s “rule of reason.”
Within three years, Congress responded to this popular groundswell by defying the Court and enacting another wealth tax on inheritance. This forced the justices to confront a moment of truth. If the conservatives continued to insist on their precedent-shattering expansion of the direct tax provision, they would trigger an escalating confrontation with the political branches that threatened to destroy the legitimacy of the entire enterprise of judicial review.
When faced with this prospect, the conservatives retreated in disarray. In its 1900 decision of Knowlton v. Moore, the Court unanimously upheld the new wealth tax. While different justices explained their dramatic U-turn in different ways, there was no mistaking the Court’s return to the narrow reading of direct taxation that had prevailed since Hylton was decided in 1796.
Yet the Court’s humiliating turnaround wasn’t enough to satisfy the Progressive political movement once it gained a decisive victory in the elections of 1908. The new congressional leadership immediately moved to pass another income tax statute and force the conservatives on the Court publicly to declare that Pollock was wrong from the moment it was decided.
Their initiative, however, met with resistance from the newly elected William Howard Taft, who would later become the only president to ascend to the chief justiceship. When campaigning for the White House, Taft had explicitly supported the Progressives’ plan: “[I]t is not free from debate how the Supreme Court, with changed membership, would view a new income tax law.” But once installed in the White House, he refused to take the risk that the reactionary Court of the Lochner era would hold its ground and strike down the income tax yet again—dramatically damaging its legitimacy before the public. Instead, he wanted Congress to do it, by proposing a constitutional amendment repudiating, once and for all, Pollock’s precedent-shattering reading. But this required the Progressives in Congress to win two-thirds majorities in both House and Senate before their initiative could be sent to the states for ratification.
Building these supermajorities would be a tough for the congressional leadership. Nevertheless, they went along with Taft’s request and made a good-faith try. Since Knowlton had already upheld wealth taxes, the leaders on Capitol Hill made coalition-building easier for themselves. They framed the 16th Amendment to make it a symbol of the widespread popular demand to repudiate Pollock once and for all. Their text focused on the imperative need to grant the national government the power “to lay and collect taxes on incomes, from whatever source derived.”
Their strategy was remarkably successful. Within a year, supermajorities in both houses backed their initiative. Once Congress sent its proposal to the states in 1909, it took only four years for 42 out of 48 of them to say yes—making the 16th Amendment’s enactment one of the most remarkable achievements of popular sovereignty in the 20th century.
Yet Professors Hemel and Kysar entirely fail to confront the original understanding of the voters and their representatives in speaking in the name of We the People of the United States. Rather than recognizing the 16th Amendment as a self-conscious decision by Americans to return to the founders’ “rule of reason,” they are urging us to rehabilitate Pollock’s discredited effort to breathe new life into the Philadelphia Convention’s compromise with slavery.
Senators Sanders and Warren should not let such a maneuver deflect them from their efforts to confront the escalating inequalities of the Second Gilded Age.
The Roberts Court should also reject their invitation to strike down a wealth tax if Democrats manage to win the coming election and enact it into law. If the current conservative majority is to remain true to its professed commitment to “originalism,” it has no choice but to recognize that the American people have addressed the precise issue in the 18th and the 20th centuries—and resolved it both times in a fashion that clears the way for a wealth tax.
Their fidelity to originalism would also permit the justices to avoid a constitutional crisis of the first magnitude. Given the political furor surrounding the appointments of Neil Gorsuch and Brett Kavanaugh, it is imperative for the reconstituted Court to demonstrate that its “originalism” is not merely a pretext for exercising a right-wing veto on the voters’ decision to elect Democrats to govern the House, Senate, and presidency. If a majority strikes down the wealth tax, it would provoke a legitimacy crisis on a scale not seen since Roosevelt tried to pack the Court in 1937.
Nobody can say how such a confrontation will turn out this time around. There can be doubt, however, that Chief Justice John Roberts is well aware of the dangers involved. Recall the way he was the swing vote in upholding Obamacare in June 2012, despite his own very grave reservations as to its constitutionality. Nevertheless, he recognized that a 5-to-4 veto of the president’s signature initiative would have provoked a Democratic counterattack on the conservative justices during Obama’s re-election campaign—and that such an onslaught would grievously damage the Court’s legitimacy for a long time to come.
I have no doubt that Roberts would once again try his hand at judicial statesmanship if the Democrats emerge victorious in 2020. Only this time around, he is no longer the swing vote who can mediate the divide between conservative and liberal judicial factions. It remains to be seen whether he will be able to convince Justices Gorsuch and Kavanaugh to recognize that prudence, as well as principle, requires them to uphold the wealth tax, and avoid a shattering crisis to the Court’s legitimacy.
Sorry, but my crystal ball clouds over at this point. But if the new appointees resist, we will be witnessing a tragedy in the classic Greek sense.
Professor Ackerman has provided advice to Elizabeth Warren about the constitutionality of the wealth tax.
