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Unformatted text preview: Chapter 8: The Power to Tax and Spend The Constitutional power to tax and spend • Article I Sec. 8 gave Congress the power to “lay and collect taxes, duties, imposts and excises to pay the debts and provide for the common Defense and general Welfare of the United States.” o All duties, imposts, and excise shall be uniform and it is basically the only standard • Direct Taxes and the power to tax income o Must have geographical uniformity and be uniform across the nation. The tax distribution must be proportioned to people o Direct taxation: Includes capitation (head taxes) and land taxes • Constitutionality of the Income Tax o The government funds its activities through taxes Pollock v. Farmer’s Loan & Trust Co. Triggered Dispute: Pollock, a shareholder of Farmers’ Land & trust, sued the company from them paying the national income tax because he believed it was unconstitutional. They claimed that taxing income was infringing on states rights to borrow money. Legal Question: Was the income tax a direct tax in violation of the constitution? Provision of Constitution: Article I Section 9 Congress’s right to tax Holding/ Majority Opinion: (Chief Justice Fuller) – The constitution divided taxes into two categories direct taxes and the class of duties, exports, and excises with rules for each. The act is unconstitutional for three reasons. 1. taxes on real estate and taxes on income are direct taxes 2. taxes on personal property or the income of personal property are direct taxes 3. The act falls of direct tax of real estate and personal property and is a violation because it is not proportion as stated in the constitution. Outcome: this invalidated the income tax leading to the adoption of the 16 th amendment. Other opinions: dissent (Harlan) – Tax on property is not a direct tax and because rents vary in states it can not be apportioned evenly. This decision also invalidates 1 all taxes on income from private property which includes bonds, stocks, which is impossible to apportion. 16 th Amendment • “Congress hall have the power to lay and collect taxes on incomes from whatever source derived without apportionment among the several states and without regard to census or enumeration” • The amendment was unanimous in the Senate and only 14 people voted against in the House Intergovernmental Tax Immunity • Establishing he Tax Immunity Doctrine o McCulloch v. Maryland showed that states were not able to tax federal entities o The doctrine states the ability of the states to tax the federal entities...
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This note was uploaded on 04/20/2008 for the course POLI 4020 taught by Professor Hoch during the Fall '07 term at LSU.
- Fall '07