the Congress shall have 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.
[Footnote 1: Const., Art. I, Sec. 8, Clause 1.]
The only tax which Congress was expressly forbidden to lay was a tax on exports.[1] It was, however, provided that indirect taxes (duties, imposts, and excises) should be uniform throughout the United States,[2] and that direct taxes should be apportioned among the states according to population.[3] The last mentioned provision was a concession to the fears of the wealthier states lest their citizens be taxed unduly for the benefit of the poorer states, and represented one of the great compromises by which the ratification of the Constitution as a whole was secured.
[Footnote 1: Const., Art. I, Sec. 9, Clause 5.]
[Footnote 2: Id., Art. I, Sec. 8, Clause 1.]
[Footnote 3: Id., Art. I, Sec. 2, Clause 3. Sec. 9, Clause 4.]
The Constitution nowhere specified just what taxes were to be deemed "direct" (Madison in his notes of the Constitutional Convention records: "Mr. King asked what was the precise meaning of direct taxation? No one answd.")[1] or what kind of uniformity was intended by the provision that indirect taxes should be uniform, and more than a century was to elapse before either of these fundamental questions was finally settled. The answer to the latter question (that the term "uniform" refers purely to a geographical uniformity and is synonymous with the expression "to operate generally throughout the United States") was given by the Supreme Court in the year 1900 in the celebrated case of Knowlton v. Moore,[2] and met with general approval. The answer to the question of what constitutes a direct tax within the meaning of the Constitution, given by the Supreme Court in 1895 in the Income Tax cases,[3] met with a different reception. The decision upset long-settled ideas, disarranged the federal taxing system, aroused popular resentment, and ultimately led to the enactment of the Sixteenth Amendment.
[Footnote 1: Farrand, "Records of the Federal Convention," Vol. II, p. 350.]
[Footnote 2: 178 U.S., 41.]
[Footnote 3: Pollock v. Farmers Loan & Trust Co., 157 U.S., 429.]