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The Beacon of Liberty, Vol. III, Issue 3

The Beacon of Liberty, Vol. III, Issue 3

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Published by Matt Erickson
Volume III, Issue 3 of The Beacon of Liberty concludes the 11-issue look (from Volume II, Issue 5) into the Constitutional power to lay and collect taxes, duties, imposts and excises
Volume III, Issue 3 of The Beacon of Liberty concludes the 11-issue look (from Volume II, Issue 5) into the Constitutional power to lay and collect taxes, duties, imposts and excises

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Categories:Types, Research, History
Published by: Matt Erickson on Sep 01, 2012
Copyright:Public Domain

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The July 22, 1813 Act (III Stat. 22) covered in theprevious issue of 
The Beacon of Liberty 
establishedcollection districts within States for the purpose of assessing and collecting the direct Taxes and internalDuties which would be laid shortly thereafter.
Section 5
of that Act provided:
"That whenever a direct tax shall be laid by theauthority of the United States, the same shall beassessed and laid on the value of all lands, lots ofground with their improvements, dwelling houses andslaves, which several articles subject to taxation, shallbe enumerated and valued by the respectiveassessors, at the rate each of them is worth in money."
The noteworthy difference between the 1798valuation Act (I Stat. 580, covered in
Beacon
II:12) andthis 1813 Act and was that all lands, dwelling houses andslaves assessed were now being enumerated and valued "atthe rate each of them is worth in money".By listing all assessed property in terms of monetary  worth, different types of property were all reduced to common denominator,
money 
.The benefit of this consistency was that many different types of property could be dealt with in similarfashion. The potential drawback of this consistency is thatit opened the door to increased usage of direct Taxes if Congress desired.
Congress, by valuating all assessed property in monetary 
 worth, could easily lay direct Taxes "on" personal property.
Those types of property then commonly taxed by the States
(cattle, horses, carriages, business property [grist mills, saw mills, iron works, forges, furnaces], goods or stock intrade, vessels and small boats, billiard tables, fireplaces,money [on hand, or due], etc.) were all likely candidates.Valuing items by monetary worth invalidated thesupreme Court's argument in
Hylton v. U.S.
thatpersonal property was not properly subject toapportionment (because it was difficult to find one type of property universally located). With valuing items by monetary worth, direct Taxes could now be easily laid on a laundry-list of properties.It would not matter greatly whether every type of themultiple properties levied were located within any particular State, for the properties levied and actually located therein were required to be precisely enumeratedand valued. Where the property was actually found, it would add to the total assessment value. If it was notpresent, it would not add to the total.To find an (equal) assessment rate, the amount of Tax apportioned to a State would be divided by the total dollaramount of the assessed property found there. Each typeof assessed property would then pay this assessed rateupon its value. More property assessed within a Statesimply lowered the rate of assessment. A primary drawback to this scheme would be that allproperty levied with a direct Tax would be enumeratedand valued. Privacy concerns and questions of practicality abound in such a scenario, though most of the potentialitems were already being assessed by the States.The main drawback to laying direct Taxes is thatproperty owners find the forecasting of the laying of suchTaxes difficult. Property owners could not therefore know their ultimate cost of owning property at the time of purchase to be sure they would have adequate funds tofully cover the cost of ownership. A fiscally-conservativeCongress would therefore either
rarely 
or
constantly 
resortto apportioned Taxes to minimize this problem.
Clause Discussed:
 Article I, Section 8, Clause 1
Concept Discussed:
• To lay and collect Taxes
Volume III: Issue 3
Distributed by:FoundationForLiberty.org
w
 
ww.FoundationForLiber
 
t
 
 y.org
1500 Highway 2
Copyright 2004, 2005 by Beacon of Liberty, LLC.
Leavenworth, WA 98826
www.BeaconofLiberty.org
 
Congress could refrain from laying direct Taxesexcept in cases of necessity to protect Citizens, which was the expected route of Congress. Congress couldalternatively regularly lay mild direct Taxes to whichCitizens could become accustomed (still allowing themto plan their expenditures accordingly).The very nature of direct Taxes, even those laid onmonetary worth, more harshly affect Citizens thanuniform Duties, but the former would offer far greaterprotection to Citizens than uniform Excises laid on the
use 
of property.Uniform Excises laid on
use 
affect Citizens every bitas severely as direct Taxes (Excises on
use 
are laid on [theuse of] property already owned, the property must beenumerated, etc.), but do not have their protectivemechanism (apportionment). With this type of Excise,Congress can easily "target" specific property forpolitical purposes, with only their discretion to keepthem in check.If assessed property is owned, then all Taxes (orExcises laid on
use 
) levied upon it must be paid, even if the property owner is unable. Uniform Duties andImposts, on the other hand, generally only affectCitizens as they spend their money. If consumers donot have enough money to pay for the consumable item withthe incorporated Duty, then they do not consume (but at leastthey know going in whether ornot they can afford it).The door to the widespreadlevying of apportioned directTaxes, though opened, was littleused. In fact, it would bedifficult in the 21
st
century toargue that direct Taxation wasused even to the degree that theframers of the Constitution firstenvisioned. Only five legislative Acts laid direct Taxes on theUnited States (in 1798, 1813,1815, 1816, and 1861, at $2million, $3 million, $6 million,$3 million, and $20 million,respectively). Direct Taxes, as a percentage of all government revenue to 1857, suppliedonly approximately 3/4 of one percent). There has notbeen a direct Tax laid since 1861.Neither, however, would it be difficult to argue thatfew of the framers ever expected such attempts to bypassthe strict constitutional protections of property (by looking at the
use 
of property, or, later, at
sources 
of income). Thankfully, the laying of Excises on the
use 
of property was a tactic little-used during the first era of government (from the establishment of the Constitutionto the Civil War). The sum total of all internal Duties(and Excises) laid during this time amounted to only 1.35 percent of all revenue collected (to 1857). Exciseson
use 
amounted to only a small portion of that (lessthan $1.5 million).The first direct Tax laid during the War of 1812 waslaid August 2, 1813 (III Stat. 53). Three million dollars were "laid upon the United States, and apportioned tothe states respectively" in Section 1 of the Act. On January 9, 1815, Congress enacted a $6 million directTax and directed that it be laid
annually 
(III Stat 164).On February 27, 1815, Congress also laid an annual
$19,998.40 Tax on the
District of Columbia 
(III Stat. 216).
On March 5, 1816 (III Stat. 255), Congressrepealed the
annual 
nature of the 1815 direct Taxes, andlaid a new $3 million Tax at the same rate per State aslaid in 1813 (andCongress laid a $9,999.20 direct Tax on the District of Columbia). Within the Acts, each State was apportioned thefollowing amounts of Tax:New apportionment procedures were added to thedirect Tax Acts laid during the War of 1812. In 1798,each State received its apportioned share of the $2million then levied. The Citizens of each State wereobligated to pay their respective share depending uponthe assessed property they owned. The State was lookedat as a whole, both in population and assessableproperty.
B.O.L. Volume III:Issue 3:Page 2
 August 2, 1813 January 9, 1815 February 27, 1815 March 5, 1816
States
III Stat. 53 III Stat. 164 III Stat. 216 III Stat. 255New Hampshire $96,793.37 $193,586.74 $96,793.37Massachusetts $316,270.98 $632,541.96 $316,270.98Rhode Island $34,702.18 $69,404.36 $34,702.18Connecticut $118,167.71 $236,335.42 $118,167.71Vermont $98,343.71 $196,687.42 $98,343.71New York $430,141.62 $860,283.24 $430,141.62New Jersey $108,871.83 $217,743.66 $108,871.83Pennsylvania $365,479.16 $730,958.32 $365,479.16Delaware $32,046.25 $64,092.50 $32,046.25Maryland $151,623.94 $303,247.88 $151,623.94Virginia $369,018.44 $738,036.88 $369,018.44Kentucky $168,928.76 $337,857.52 $168,928.76Ohio $104,150.14 $208,300.28 $104,150.14North Carolina $220,238.28 $440,476.56 $220,238.28Tennessee $110,086.55 $220,173.10 $110,086.55South Carolina $151,905.48 $303,810.96 $151,905.48Georgia $94,936.49 $189,872.98 $94,936.49Louisiana $28,295.11 $56,590.22 $28,295.11
Total $3,000,000.00 $6,000,000.00 $3,000,000.00
District of Columbia $19,998.40 $9,999.20
Direct Tax Quotas and Acts of the War of 1812
Direct Tax Acts laid during the War of 1812
 
Beginning in 1813, however, the apportionmentprocess was broken down even further. Besidesapportioning to each State the total amounts listed above,a later section of the Act apportioned to each
County 
theCounty's portion of the State's Tax, based upon thepopulation of the County as compared to the State.Section 2 of the August 2, 1813 Act, for example,apportioned New Hampshire's quota of $96,793.37 (aslaid by Section 1) so that Rockingham County paid$25,298.89; Strafford County, $17,698.66; HillsboroughCounty, $20,219.16; Cheshire County, $19,318.03;
Grafton County, $11,910.43; and Coos County, $2,348.20.
The further the direct Tax was apportioned, the morethe Tax represented the actual property and populationfound within a smaller locale. Apportioning to the County level eliminated the subsidy of one County to another that was possible under State apportionment.Direct Taxes, though specifically laid on property (owned by individuals), are "laid upon the United States,and apportioned to the States respectively" as detailed inSection 1 of the August 2, 1813 Act. Words of identicalmeaning were used in 1798, 1815 and 1816 (and 1861).This wording was made more literal beginning in1813, when Congress allowed (by Section 7) a 15%deduction off the amount due within each State if a Statedirectly paid its quota into the Treasury in a timely manner(before February 10, 1814 [allowing States the notice of six months from August, 1813]). If States could not pay insuch a timely manner, Section 7 alternatively allowed a 10% deduction if they could pay by May 1, 1814(allowing States the notice of 9 months). The use of thismechanism assured the United States a quicker payment(of a lesser sum) without collection expenses.The States, at their discretion, assumed the debt which was otherwise collectable only upon the assessed property of individuals. A benefit allowed by this mechanism wasthat the States could then use their collection proceduresand officers already in place for added efficiency.If the State did not elect to pay its quota itself, theState had nothing to do with the direct Tax. Collectors working under the supervision of the Commissioner of theRevenue (acting under the Secretary of the Treasury) thencollected the Tax from the State Citizens on the property assessed by the Tax Act (as in 1798).The implications of this alternative collectionmechanism were significant and far-reaching. Thismechanism properly supported the concept of Statesovereignty within a dual structure of the federal/Stategovernment system. This process of the States paying thequotas themselves more-closely followed the original
requisition
system used under the Articles of Confederation,
but it provided the vital safety feature that if the Statefailed to pay the appropriate funds, the federal collectionprocess resumed on the property of individuals (specifically see the proviso in Section 5 of the 1816 direct Tax Act;III Stat. 255 @ 256).The States, in ratifying the Constitution, gave up theability to lay Imposts (without the consent of Congress, see Art. I:10:2). They did not, however, give up the ability tolay direct Taxes on the property of their Citizens. Both theState and federal governments therefore have the ability lay such direct Taxes. Letting the States collect federal directTaxes helps to minimize federal intervention into the livesof State Citizens.The mechanism specified in 1813 (and in all laterdirect Tax Acts) allowed each State individually thediscretion to pay to the Government of the United Statesthe State's quota. The States would then individually collect the Tax from their own Citizens
according to their 
normal methods of taxation
 with their own revenue officers.
It would thus not matter greatly which types of property Congress would specify,
for they would only be attached if the State did not assume the quota 
. The State would lay Taxes on items of its chosing. This feature madethe assessed property specified by Congress largely immaterial (in States which assumed their quota).Though the direct Tax Acts laid Taxes amounting to$14 million between 1798 and 1816, only $12.74 million was collected by the United States due to such discounts.The total
amount 
of direct Taxes to be laid aredetermined by Congressional discretion, as are the
types 
of property levied (until States assume their quotas and thenthey direct the property levied). The amount of Tax isthen apportioned to the States under the express terms of the Constitution (Article I, Section 2, Clause 3 and ArticleI, Section 9, Clause 4). As far as the Constitution is concerned, the
amount 
of Tax is irrelevant — there are no minimum nor evenmaximum amount or percentage standards which Congressmust follow. Neither does the Constitution care whichproperty is actually levied, since taxation has nothing strictly to do with targeting property. Which property happened to be levied with the Tax was financially immaterial as long as it could provide the necessary sums(apportioned) with the minimum of collection difficulties.
B.O.L. III:3:3
Direct Taxes laid upon the United States
State assumption of federal direct Tax quotas allowed the States to choose theitems to assess and levy with Taxes.

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