Constitution Article 1 §8.1, Superpower: Taxation

The Constitution can’t defend itself, and we can’t defend it either if we don’t know what it says. That’s why on Wednesdays we study the Constitution. Last week I learned about Article One, Section 7, Clause 3, the Orders, Resolutions, and Votes Clause, also fondly referred to as the ORV Clause. That completed Section 7, which was all about how a bill becomes a law (or not). Now I’m moving on to Article One, Section 8, which comprises a list of the powers of Congress.

Article 1 §8.1

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

Power of Taxation

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises,

The power of Congress to come up with new ways to tax the people is practically unlimited. Although the courts have curtailed that power in specific instances, almost all of those cases were later overturned. Once exception: there still seems to be some legal traction for the idea that Congress may not lay a tax that would impair the sovereignty of the states, i.e. states don’t pay federal taxes. Of course, it’s more complicated that that. Here’s the fine print, straight from the Annotated Constitution:

Articulation of the current approach may be found in South Carolina v. Baker. The rules are “essentially the same” for federal immunity from state taxation and for state immunity from federal taxation, except that some state activities may be subject to direct federal taxation, while states may “never” tax the United States directly. Either government may tax private parties doing business with the other government, “even though the financial burden falls on the [other government], as long as the tax does not discriminate against the [other government] or those with which it deals.” Thus, “the issue whether a nondiscriminatory federal tax might nonetheless violate state tax immunity does not even arise unless the Federal Government seeks to collect the tax directly from a State.”

It seems strange to me that the power of taxation should be so broadly written by a bunch of guys who went to war over the subject, but maybe when the shoe is on the other foot opinions can change. Or, perhaps it was such a hot topic they didn’t want to touch it. After all, legal history has confirmed congressional taxing power, but it did have to go to court – repeatedly – to work out the details, and a federal income tax wasn’t instituted until the 16^th Amendment in 1913.

Purpose of Taxation

to pay the Debts and provide for the common Defence and general Welfare of the United States

I feel that it’s important they specified the purpose of taxation as supporting the expenses of government (as opposed to, say, enriching elected officials) but I guess it’s pretty well covered in other places, and no one has ever tried to litigate against this particular expression of the concept. Flaunting one’s conflicts of interest in en vogue this election cycle, but it’s a trend that dates quickly.

Something that never goes out of style, though? Attempts to tip the balance of power and remove checks on one or another branch of government. You might expect the power of taxation to be used to get money, but the legal history is more about extending the reach of Congress. Paired with the “Necessary and Proper Clause” which comes later in this section of Article 1, Congress can regulate businesses in the states in order to effectively tax it. Drugs and firearms are regulated beyond what is necessary to collect sales tax, but only because sales tax is involved. The Child Labor Tax Case of 1922 still sets the standard for when Congress can get away with this “legislation through taxation” strategy. (Even though I’ve framed it as a sketchy bit of a power grab, as the examples may indicate, this seems to be a power that is often used for good instead of evil.)

Uniformity Requirement

all Duties, Imposts and Excises shall be uniform throughout the United States;

Ah, equal versus equitable. The tension goes all the way back to the Constitution, and people still struggle with the concept. When it comes to taxes, apportioning among the states according to the census or imposed uniformly throughout the United States depends upon whether a tax is “direct” or “indirect.” Footnotes tell me that the question of direct and indirect taxes will come up again in Section 9, so I’ll leave off for now on that detail.

Relevance Today

In National Federation of Independent Business (NFIB) v. Sebelius the Supreme Court upheld as an exercise of the taxing authority a requirement under the Patient Protection and Affordable Care Act (ACA) that mandates certain individuals to maintain a minimum level of health insurance. Five years later, a new Congress chose not to use that authority and removed the deeply unpopular mandate from an even less popular tax bill, thus ensuring that thousands of people will gamble their health by going uninsured, and thousands more will have no choice about it as rates go up for everyone.