Pollock v. Farmers' Loan & Tr. Co. - 158 U.S. 601, 15 S. Ct. 912 (1895)

Rule:

The power to lay direct taxes apportioned among the several states in proportion to their representation in the popular branch of United States Congress, a representation based on population as ascertained by the census, is plenary and absolute; but to lay direct taxes without apportionment is forbidden. The power to lay duties, imposts, and excises is subject to the qualification that the imposition must be uniform throughout the United States. The tax imposed by §§ 27-37, inclusive, of the Act of 1894, so far as it falls on the income of real estate and of personal property, being a direct tax within the meaning of the United States Constitution, and, therefore, unconstitutional and void because not apportioned according to representation, all those sections, constituting one entire scheme of taxation, are necessarily invalid.

Facts:

Appellants taxpayers Charles Pollock and Lewis H. Hyde, respectfully present their petition for rehearing of the court’s decision which ruled that only certain sections of the Tariff Act of August 15, 1894, were unconstitutional. Appellants reasoned that the question involved in these cases was as to the constitutionality of the provisions of the tariff act of August 15, 1894, (sections 27 to 37,) purporting to impose a tax upon incomes. The court has held that the same were unconstitutional, so far as they purport to impose a tax upon the rent or income of the real estate and income derived from municipal bonds. However, appellants argued that the court never determined if the unconstitutionality of certain sections rendered the entire act unconstitutional and whether the act unconstitutionally laid indirect taxes upon income from personal property. Hence, this petition.

Issue:

Should the petition for rehearing for a determination as to the constitutionality of the provisions of §§ 27-37 of the Tariff Act of August 15, 1894, be granted?

Answer:

Yes.

Conclusion:

The court granted the petition for rehearing and vacated its original decree. The court also remanded the case with instructions to grant appellants the relief they sought from taxes levied and paid. The court further held that the act was valid and therefore the parts that were constitutional and wholly independent of each other stood while other parts were struck down. The court explained that taxes on real estate being indisputably direct taxes, taxes on the rents, or income of real estate were equally direct taxes. Likewise, taxes on personal property, or on the income of personal property, were direct taxes. The court concluded that the act in question was constitutional, however, the tax imposed by §§ 27-37, was unconstitutional because those sections improperly attempted to apply an unapportioned tax on income. The taxes were considered indirect, as they were applied to income from real estate and invested personal property, and such income was not distinguishable from the property itself.