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Pollock v. Farmers' Loan & Trust Co.
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| Pollock v. Farmers' Loan & Trust Co. | |
| Reference: 157 U.S. 429 | |
| Term: 1895 | |
| Important Dates | |
| Argued: March 7, 1895 Decided: April 8, 1895 | |
| Outcome | |
| United States Circuit Court for the Southern District of New York reversed | |
| Majority | |
| Melville Weston Fuller • Horace Gray • David Josiah Brewer • George Shiras | |
| Concurring | |
| Stephen Johnson Field | |
| Dissenting | |
| John Harlan I • Howell Edmunds Jackson • Edward Douglass White • Henry Billings Brown | |
Pollock v. Farmers' Loan & Trust Co. is a case decided on April 8, 1895, by the United States Supreme Court holding that income taxes on interest, dividends, and rents are direct taxes that must be apportioned among the states according to their population. The Supreme Court reversed the ruling of the United States Circuit Court for the Southern District of New York. The decision was later voided by the Sixteenth Amendment of the U.S. Constitution in 1913, which allowed income taxes to be implemented without apportionment. [1][2]
Why it matters: The Supreme Court's decision in this case established that income taxes on interest, dividends, and rents are, in effect, direct taxes that must be apportioned among the states according to their populations. This decision was later voided by the Sixteenth Amendment in 1913. To read more about the impact of Pollock v. Farmers' Loan & Trust Co. click here.
Background
Congress imposed the Income Tax Act of 1894. The federal government had the constitutional authority to impose direct taxes if those taxes were apportioned among the states according to population, however, it was argued that the income tax was not a direct tax.
Farmers' Loan and Trust Company in New York was liable for paying this tax. As a result, the directors of the company argued that the tax must also be paid for the amount of incomes and profits of those who used the company as a fiduciary. Charles Pollock, a stockholder of Farmers' Loan and Trust Company, filed a bill arguing that the income tax was unconstitutional. The United States Circuit Court for the Southern District of New York ruled against Pollock. He appealed his case to the Supreme Court where the income tax was found to be unconstitutional.[1][2]
Oral argument
Oral argument was held on March 7, 1895. The case was decided on April 8, 1895.[1]
Decision
The Supreme Court decided 5-4 to reverse the decision of the United States Circuit Court for the Southern District of New York. Chief Justice Melville Weston Fuller delivered the opinion of the court. Justice Stephen Johnson Field wrote a concurring opinion. Justices Edward Douglass White and John Harlan I wrote dissenting opinions.[2]
Opinions
Opinion of the court
Chief Justice Melville Weston Fuller, writing for the court, argued that the distinction between direct and indirect taxes was clearly established by the U.S. Constitution and that taxes on real estate, property, or income were all considered direct taxes. To further this point, Fuller referenced the ruling in Hylton v. United States which argued that taxes on the possession of goods were not direct taxes. The ruling in Hylton v. United States established that all taxes on land are direct taxes which included taxes on rents or income derived from land, according to Fuller.[2]
| “ | From the foregoing, it is apparent: 1. That the distinction between direct and indirect taxation was well understood by the framers of the Constitution and those who adopted it. 2. That, under the state systems of taxation, all taxes on real estate or personal property or the rents or income thereof were regarded as direct taxes. 3. That the rules of apportionment and of uniformity were adopted in view of that distinction and those systems. 4. That whether the tax on carriages was direct or indirect was disputed, but the tax was sustained as a tax on the use and an excise. 5. That the original expectation was that the power of direct taxation would be exercised only in extraordinary exigencies, and down to August 1894, this expectation has been realized. The act of that date was passed in a time of profound peace, and if we assume that no special exigency called for unusual legislation, and that resort to this mode of taxation is to become an ordinary and usual means of supply, that fact furnishes an additional reason for circumspection and care in disposing of the case. [3] | ” |
| —Melville Weston Fuller, majority opinion in Pollock v. Farmers' Loan & Trust Co.[2] | ||
Concurring opinion
Justice Stephen Johnson Field, in a concurring opinion, argued that the entirety of the income tax should be void. Field contended that, in addition to the income tax being a direct tax, it was unconstitutional because it did not conform to the rule of uniformity and it exceeded the constitutional authority of Congress.[2]
| “ | I am of opinion that the whole law of 1894 should be declared void and without any binding force -- that part which relates to the tax on the rents, profits or income from real estate, that is, so much as constitutes part of the direct tax, because not imposed by the rule of apportionment according to the representation of the States, as prescribed by the Constitution -- and that part which imposes a tax upon the bonds and securities of the several States, and upon the bonds and securities of their municipal bodies, and upon the salaries of judges of the courts of the United States as being beyond the power of Congress, and that part which lays duties, imposts and excises as void in not providing for the uniformity required by the Constitution in such cases. [3] | ” |
| —Stephen Johnson Field, concurring opinion in Pollock v. Farmers' Loan & Trust Co.[2] | ||
Dissenting opinions
Justice Edward Douglass White, in a dissenting opinion joined by Justice John Harlan I, argued that the opinion of the court did not align with previous decisions of the Supreme Court regarding the definition of a direct tax.[2]
| “ | The facts, then, are briefly these: at the very birth of the government, a contention arose as to the meaning of the word 'direct.' The controversy was determined by the legislative and executive departments of the government. Their action came to this court for review, and it was approved. Every judge of this court who expressed an opinion made use of language which clearly showed that he thought the word 'direct' in the Constitution applied only to capitation taxes and taxes directly on land. Thereafter, the construction thus given was accepted everywhere as definitive. The matter came again and again to this court, and, in every case, the original ruling was adhered to. The suggestions made in the Hylton case were adopted here, and, in the last case here decided, reviewing all the others, this court said that direct taxes within the meaning of the Constitution were only taxes on land and capitation taxes. And now, after a hundred years, after long-continued action by other departments of the government, and after repeated adjudications of this court, this interpretation is overthrown and the Congress is declared not to have a power of taxation which may at some time, as it has in the past, prove necessary to the very existence of the government. By what process of reasoning is this to be done? By resort to theories in order to construe the word 'direct' in its economic sense, instead of in accordance with its meaning in the Constitution, when the very result of the history which I have thus briefly recounted is to show that the economic construction of the word was repudiated by the framers themselves, and has been time and time again rejected by this court; by a resort to the language of the framers and a review of their opinions, although the facts plainly show that they themselves settled the question which the court now virtually unsettles. In view of all that has taken place and of the many decisions of this court, the matter at issue here ought to be regarded as closed forever. [3] | ” |
| —Edward Douglass White, dissenting opinion in Pollock v. Farmers' Loan & Trust Co.[2] | ||
Justice John Harlan I, in a dissenting opinion, added that a tax on income or profits did not align with the constitutional definition of a direct tax and it was therefore constitutional to apply the income tax without apportionment by state population.[2]
| “ | Upon principle and under the doctrines announced by this court in numerous cases, a duty upon the gains, profits, and income derived from the rents of land is not a 'direct' tax on such land within the meaning of the constitutional provisions requiring capitation or other direct taxes to be apportioned among the several States according to their respective numbers determined in the mode prescribed by that instrument. Such a duty may be imposed by Congress without apportioning the same among the States according to population. [3] | ” |
| —John Harlan I, dissenting opinion in Pollock v. Farmers' Loan & Trust Co.[2] | ||
Impact
| Federalism |
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| •Key terms • Court cases •Major arguments • State responses to federal mandates • Federalism by the numbers • Index of articles about federalism |
Pollock v. Farmers' Loan & Trust Co. established that income taxes on interests, dividends, and rents were, in effect, direct taxes and must be apportioned among the states according to their populations.
This decision, however, was voided by the Sixteenth Amendment of the U.S. Constitution in 1913, which allowed income taxes to be implemented without apportionment. The Sixteenth Amendment states:
| “ | The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration. [3] | ” |
| —United States Constitution[4] | ||
See also
External links
- Full text of case syllabus and opinions (Justia)
- Supreme Court of the United States
- Search Google News for this topic
Footnotes
- ↑ 1.0 1.1 1.2 Oyez, "Pollock v. Farmers' Loan and Trust Company," accessed June 22, 2022
- ↑ 2.00 2.01 2.02 2.03 2.04 2.05 2.06 2.07 2.08 2.09 2.10 Justia, "Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429 (1895)," accessed June 22, 2022
- ↑ 3.0 3.1 3.2 3.3 3.4 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
- ↑ Constitution Annotated, Sixteenth Amendment," accessed June 22, 2022
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