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The Jay, Rutledge, and Ellsworth Courts (1789–1800)

Decisions

In what decision did the Court address direct and indirect taxes?

The Court unanimously ruled 3–0 in Hylton v. United States (1796) that Congress had the power to tax carriages without apportioning the taxes among the various states. Daniel Hylton was cited for not paying taxes on his 125 stipulated carriages. He contended that the tax was unconstitutional because Article II, Section 9, of the U.S. Constitution provides that no direct taxes “shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.” This provision means that direct taxes could not be imposed unless they were apportioned among the states based on population. Interestingly, at the Constitutional Convention of 1787, a delegate had asked for a definition of a direct tax and no one answered. This meant that the definition of a direct tax was unclear. The Supreme Court reasoned that the tax on carriages was an indirect tax not subject to the apportionment requirement. The Court reasoned that if a tax could not easily be apportioned among the states, then it was most likely an indirect tax. Because the Court held that a tax on carriages was not a direct tax, it concluded that the tax could be imposed lawfully.