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HIS article proposes for its object an inquiry into the

probable historical meaning of the words “direct taxes,” as used in the constitution of the United States. Its purpose is to ascertain what this phrase meant to the men who framed the constitution, and established the federal government under its provisions. Although it will become necessary to study a decision rendered by the Supreme Court in 1796, no further attention will be devoted, except incidentally, to the subsequent judicial interpretation of the direct tax clause. A satisfactory treatment of the simple historical question here presented will open a field of investigation sufficiently large for a single essay.

It can hardly be necessary to advance any arguments in justification of the methods of procedure by which this problem will be approached. The reader will be asked to dismiss from his mind all definitions advanced by nineteenth century economists, and to remember simply the distinctions that had been drawn between direct and indirect taxes prior to the year 1787. In the light of such economic ideas as were prevalent at the time, it is proposed to examine all the discussions of taxation that can be found in American writings from 1750 to 1800, so far as these have come down to us. The writer can not hope that his success in finding materials has been so complete that the reader can discover no errors of omission. But he believes that a careful examination of all the sources of information available in two large libraries has left no important opinion, or shade of opinion, unrepresented in the mass of data upon which he has based his conclusions.

In a previous article the writer has attempted to trace in general economic literature the development of the distinction between direct and indirect taxes. The germ of such an idea was found in incidental expressions used by Bodin in 1579, and by a few writers of the seventeenth and eighteenth centuries.

1 Political Science Quarterly, September, 1898.

In the works of these men occur such expressions as “pay taxes directly or indirectly," and the like. It was not until 1758 that the physiocrats developed in France a classification of taxes as direct and indirect. In Italy, Germany, and England, the discussion started by the physiocrats resulted in the general introduction of these terms into economic literature. In England the distinction was first used by Adam Smith in 1776, but it was many years before other writers came to adopt such a terminology

It is now necessary to ascertain from what works the men who framed our federal constitution acquired their knowledge of the terms direct and indirect taxes. We may safely conclude that such information must have been secured from English or French writers, or from English, French, or Latin editions of books written by German or Italian authors. The German language was almost unknown in cultivated circles in America as late as 1813. The same is probably true of Italian. Such English political writers as Hobbes, Locke, and Hume, were widely known; and Petty had probably been read by others beside Franklin, who had clearly followed that author's explanation of value.

Bodin's Republic may have been familiar to many, while Montesquieu's great work had been studied most thoroughly by nearly all American statesmen. An examination of the writings of the Revolutionary period and of the debates on the constitution shows numerous citations from Pufendorff's Law of Nature and Nations,9 Postlethwayt's Great Britain's True System,* De Witt's True Interest of Holland," and Necker's Admin

1 For example, in that year George Ticknor set out to learn German. He could find no one in Boston able to act as instructor, and had the greatest difficulty in finding even a German dictionary. Life, Letters, and Journals of George Ticknor, i, 11-12 (Boston, 1880).

? This was quoted in the addresses of the Congress of 1774. Force's American Archives, Fourth Series, i, 930 (Washington, 1837). See Bancroft, History of the United States, vi, 211, author's last revision (New York, 1891).

3 Works of John Adams, iv, 82 (Boston, 1856); Elliot, Debates on the Consti. tution, ii, 454, second edition (Philadelphia, 1836); Writings of Madison, i, 129, ii, 240, 243, 248, 251, 372 (Philadelphia, 1867).

• Dickinson's “Farmer's Letters," American Museum, iv, 463–464 (Philadel. phia, I787-1792).

Life and Correspondence of Rufus King, i, 301 (New York, 1894); Elliot, Debates, ii, 55, iii, 131.



istration of the Finances of France. Sir James Steuart's Inquiry into the Principles of Political Economy was also a familiar treatise, and it was quoted in the discussions which the di rect tax clause subsequently aroused.2 We may assume, furthermore, that Bielfeld's Institutions Politiques was a familiar work with the men who sought with such care historical examples and political maxims for use in the great task that lay before them.

The physiocrats, also, were known in this country; and their influence may be traced in the writings of Franklin, who had come into contact with this school of economists during his first visit in Paris in 1767.3 Franklin corresponded with Dupont and other physiocrats; and, at the time of the adoption of the constitution, was discussing with some of them the question of American taxation.* References to physiocratic theories may be found in the writings of other statesmen of the period."

Adam Smith's Wealth of Nations was probably little read until the close of the Revolution. Hamilton is said to have written a commentary upon this work as early as 1783.6 After 1785 an increasing number of references to Adam Smith may be found in the literature of the period;? while the first American

| Elliot, Debates, ii, 483.

• Tucker's edition of “Blackstone's Commentaries," i, Part I, Appendix, 232-233 (Philadelphia, 1803). The sections referred to were written prior to 1796. See also “Pendleton's Observations,” in Bache's Aurora, Feb. II, 1796.

• Wetzel, “Franklin as an Economist,” Johns Hopkins University Studies in Historical and Political Science, xiii, 462-467 (Baltimore, 1895); Elliott, Tarif Controversy in the United States, 34-35 (Palo Alto, 1892).

• Bigelow, Works of Franklin, iv, 194, ix, 384, 400 (New York, 1887-1888). The last references concern American taxation in 1787. In E. Daire's Oeuvres de Tur. got, i, 409-415 (Paris, 1844), there is a fragment on direct and indirect taxation, to which there is appended a note by Dupont de Nemours. Here Dupont says that this was written by Turgot for Franklin's benefit at the time when Hamilton, the finance minister of the United States, was endeavoring to extend the indirect taxes that caused the whiskey rebellion. This statement by Dupont has been accepted by a number of writers who have overlooked the fact that Turgot died more than eignt years before Hamilton became Secretary of the Treasury. Dupont's statement can hardly pass at its face value.

5 Works of John Adams, iv, 278, 299, viii, 340, 448 ; Lodge, Works of Hamilton, i, 266 (New York, 1885-1886); Writings of Madison, i, 422 ; American Museum, i, 16.

• J. C. Hamilton, History of the Republic, ii, 514 (New York, 1857-1860).

'Life and Correspondenee of King, i, 109; mss. quoted by Bancroft, History of the United States, vi, 144; Writings of Madison, i, 146; Works of Franklin, vi, 72–73, x, 52 ; Works of Fisher Ames, i, 49 (Boston, 1854); American Museum, v, 280, xii, 162 ; Ford, Writings of Jefferson, v, 173 (New York, 1892 -); Lodge, Works of Hamilton, ii, 258 ; Writings of Gallatin, i, 75 (Philadelphia, 1879); 3 Dallas Reports, 180; Annals of Congress, First Congress, 1215 (Washington, 1834).

edition of the Wealth of Nations appeared in 1789 in Philadelphia.

Having thus briefly considered the probable sources from which the terms were derived, we must now consider what European writers had said prior to 1787 concerning the distinction between direct and indirect taxes. For detailed information the reader may be referred to the article published by the writer in 1898. In brief, the results of this investigation were as follows:

1. The physiocrats had been the only writers to classify taxes formally as direct and indirect. They applied the term direct only to taxes falling on the net product of the soil. All other taxes, according to their view, were shifted finally onto the income derived from land, and were considered indirect. Turgot, however, in one of his works stated that there were only three possible kinds of imposts: (1) direct upon landed' property; (2) direct upon persons; (3) indirect upon consumption.

2. Adam Smith, after becoming acquainted with the physiocrats, used these terms in his Wealth of Nations. He did not classify taxes as direct and indirect, and it is not easy to state definitely the exact meaning that he attached to the terms in all the passages where they occur. But the idea most commonly in Smith's mind seems to have been that expressed in the following passage, which was subsequently quoted in the United States : “The State, not knowing how to tax, directly and proportionably, the revenue of its subjects, endeavors to tax it indirectly

* One of the diverting features of the income tax cases was the attempt of Mr. Seward to persuade the court that taxes sur les fonds" should be translated taxes "upon the funds," i. e, upon property in general. Mr. Seward's Historical Argument, 73. This error was repeated in a controversy conducted, through the New York Evening Post, with Prof. Seligman, who had beer so unkind as to call attention to this obvious mis-translation. Evening Post, March 12, 13, 15, and 16, 1895. It is true that, even in the seventeenth century, fonds" was used in the meaning which Mr. Seward would give it in this passage from Turgot. See La Fontaine, Oeuvres, IX, 18. But Turgot in the following paragraphs often uses the “ sur les terres" as the equivalent of “sur les fonds," thus making his meaning perfectly clear.

by taxing their expense.” This might easily lead to a formal classification, in which taxes upon revenue would be called direct, and taxes upon consumption would be considered indirect.

3. Sir James Steuart, who did not use these terms, presented a classification of taxes which was subsequently quoted in this country. He distinguished between “proportional" and "cumulative” taxes. The former comprised taxes upon_alienation, such as customs, excise, and stamp duties; and formed part of the prices of commodities, being paid finally by the consumer. The latter comprised taxes upon possessions, and were intended to affect the payer in such a way that they could not be "drawn back," or shifted. After the adoption of the constitution, some American writers turned to Steuart's classification.

4. The other writers of the seventeenth and eighteenth centuries that used the terms direct, immediate, directly, or immediately, when speaking of taxes, presented no very definite ideas, and offered no classifications. But it is worth our while to notice two suggestions bearing on this subject, which American statesmen received from early political writings. One is found in Hume's statement that taxes upon consumption "seem, in some measure, voluntary; since a man may choose how far he will use the commodity which is taxed.” Somewhat similar remarks may be found in Montesquieu. A second suggestion is found in the statements made by Pufendorff, Montesquieu, Hume, Bielfeld, and others, to the effect that taxes upon commodities are paid insensibly since they are concealed in the price of merchandise. Similar expressions occur, with tedious iteration, in American discussions of taxation.

II. It is important for the correct solution of the question proposed by this article for us to determine how far the term direct tax had come into use in the United States before the date of the constitutional convention. If it could be shown that the word had a settled and generally recognized meaning prior to that time, our task would be greatly simplified. But, unfortunately, the facts do not support such a proposition.

David Hume, “Of Taxes,” 1752. Contained in Essays, Moral, Political, and Literary, i, 358 (London, 1882).

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