In an earlier article it was shown that, with the exception of a casual remark by Sir William Petty and a single expression used by John Locke, no suggestion of a distinction between direct and indirect taxes seems to have been made by any English writer before the time of Adam Smith. The physiocratic definition was first advanced in 1758, but nothing was heard of it immediately upon this side of the water. Casual remarks in the works of Bodin, Montesquieu, and Bielfeld might possibly have suggested the distinction, but they do not appear to have done so. As nearly as can be ascertained by a careful investigation of American writings from 1750 to 1800, the words direct and indirect taxes were not used in this country until the close of the Revolution. Even then they were seldom used before the meeting of the federal convention, and it was not until discussion of the constitution began that the terms came into general use.2

Evidence upon this point must now be presented.

Prior to

the controversy over the right of Great Britain to tax the colonies, American writers had devoted very little attention to the subject of taxation. Upon this topic more can perhaps be found in the Summary of the British Settlements,3 by Dr. William Douglass, than in any other work written before 1760. Here the author discussed the various forms of taxation prevailing in the several colonies, and offered suggestions for the improvement of colonial tax systems. But he did not attempt to classify taxes, and did not use the terms direct and indirect.

During the controversy over parliamentary taxation there appeared a flood of writings, in which this question was discussed in all its aspects. A careful reading of the more important of these publications fails to disclose anything that resembles the

1 Petty spoke of taxes paid "insensibly and indirectly," which was changed by a typographical error into "insensibly and directly." Locke said that certain taxes might not be paid immediately" out of the pocket of the landowner.

2 In the income tax cases the counsel claimed that the terms were "household words" in 1787, that a direct tax was understood to mean a tax that fell upon property or its owner, while an indirect tax meant one that ultimately fell upon some other person than the original payer. Mr. Seward's Historical Argument, 18-19.

3 (Boston, 1749, 1751.)

distinction between direct and indirect taxes. If this had been generally known at the time, it could not have failed to appear in the writings of the leaders in this controversy. A modern writer can hardly describe this interesting contest without employing such terms. Yet John Dickinson, one of the most skillful of the Revolutionary penmen, distinguished between two sorts of taxes, one paid by the owner of property, the other paid by consumers as a part of the price of commodities; but knew of no simple words in which to make such a classification.

In the course of the war with the mother country, anxiety over the continental finances gave rise to discussions of paper money and taxation. In these no trace of this distinction can be found until the close of the war, when the words direct and indirect taxes appear in a few private letters of the period. Pelatiah Webster, in his "Essays upon Free Trade and Finance," often is at a loss for words to convey the ideas which modern writers would express readily in these easy terms. But, in 1790, after the discussions over the constitution, he readily avails himself of these convenient words. In 1782, Thomas Paine commented at

1 In order to determine this point the following works were read carefully: James Otis, Rights of the Colonies (1764), Vindication of the Colonies (1765); Dulany's Considerations on the Propriety of Imposing Taxes (1765); Dickinson's Farmer's Letters (1767-8); Seabury's Free Thoughts (1774), View of the Controversy between Great Britain and the Colonies (1774); Hamilton's Full Vindication (1774), The Farmer Refuted (1775); Myles Cooper's Friendly Address (1774); and Joseph Galloway's Candid Examination (1775). The writings of Samuel Adams have been examined, so far as they are to be found in Wells' Life and Public Services of Samuel Adams (Boston, 1865). Also the proceedings of the congresses of 1765 and 1774 have been read. In England the speeches of Chatham and Burke upon American taxation have been examined, with the same result. See John Fiske's American Revolution, i, 15 (Boston and New York, 1896). Senator Sumner, in 1866, describing the speeches of James Otis, puts these words into the mouth of the orator, although Otis did not use them. See Cong. Globe, 39 Congress, I. Session, Part I, 678-679.

American Museum, iv, 469.

To determine this point, the published writings of the Revolutionary epoch have been carefully examined. In some cases, the only materials available were letters or addresses contained in published biographies. The list of writers whose works were thus read includes the names of Washington, Hamilton, Jefferson, Madison. Franklin, Henry, John Adams, Samuel Adams, William Livingston, Richard Henry Lee, Arthur Lee, William Lee, Boudinot, King, Jay, Gerry, Sherman, Reed, Witherspoon, Webster, and Paine. Political Essays, 340 (Philadelphia, 1791).

length upon a passage from a French work, in which the author had spoken of England's right to tax the colonies "directly or indirectly." But these words seemed to have no special meaning to him, and he does not make use of a similar expression until 1792.1

But a different, and somewhat singular, use of the terms direct and indirect in regard to taxes now claims our attention. In 1754, Governor Shirley submitted to Franklin a plan of colonial union, in which parliamentary taxation of America was practically authorized. Franklin replied in letters which finally were published in 1766 in the London Chronicle. In these he objected strenuously to taxation of the colonies by parliament. Among other things, he urged that the Navigation Acts, which regulated American trade in the interest of England, obliged the colonists to pay "secondary taxes" to the mother country. In view of this fact he considered that it would be "as unnecessary as grievous" to oblige Americans "to pay immediate heavy taxes." Franklin's idea was that the regulation of American trade burdened the colonies for the benefit of English merchants, and that this was really a roundabout or indirect way of taxing America. He objected to the proposal that parliament should, in addition, impose taxes immediately upon the colonists.

This argument of Franklin's was repeated many times during the controversy with Great Britain.3 In 1765 Samuel Adams referred to the subject. In opposition to the stamp tax, he contended that Great Britain was already taxing the colonies sufficiently. She obliged them to carry their principal products to her own shores, and to take British goods in exchange, conforming "to her price both in buying and selling." This he considered "an indirect tax." The stamp duties would be "actual direct taxes," and should not be imposed. In resolutions

1 Conway, Writings of Thomas Paine, ii, 72, 484, 495 (New York, 1894-1896). See Gordon's History of the United States, i, 130-131 (London, 1788); Sparks, Works of Franklin, iii, 56-57 (Boston 1840); Bigelow, Works of Franklin, ii, 376, 382.

3 See the petition to parliament drawn up by the congress of 1765, in American Museum, iv, 90; Daniel Dulany, Considerations on the Propriety of Imposing Taxes in the British Colonies, 74; Correspondence and Public Papers of John Jay, i, 226 (New York, 1890-1893); Elliot, Debates, v, 32.

4
▲ Life and Public Services of Samuel Adams, i, 83.

drafted by Adams, at about this time, similar considerations are advanced. These statements make it clear that the words direct and indirect were used with reference to the direct or indirect exercise of parliament's power to draw money from the colonies. Adams calls stamp duties direct because they were imposed as a direct and unconcealed attempt to tax America. If he had had any technical classification in mind, he would have called these duties indirect taxes.

In 1774, Franklin, referring to the duties that parliament had endeavored to levy upon glass, paper, tea, and other imports, mentioned the burdens imposed by the Navigation Acts. He said that the colonists "saw that by this indirect mode it was in the power of Britain to burthen them as much as by any direct tax."2 At about the same time, John Adams quoted these expressions of Franklin. The same thought is found in Robertson's History of America, where it is stated that "Spain and Portugal are the only European powers who derive a direct revenue from their colonies." Later, David Ramsay referred to the stamp duties as "direct internal taxes, laid by authority" of parliament. Nothing like the classification of taxes as direct can be found in these expressions, in which stamp duties are called a direct exercise of the taxing power of Great Britain.

We must now study the occasional references to the distinction between direct and indirect taxes which are to be found in the writings of the six years preceding the constitutional convention. In 1782, in his Continentalist, Hamilton had considered the theory that all taxes are ultimately borne by the land owner. He did not use the terms direct and indirect in this connection, but did speak" of revenues drawn "immediately" from the land. In the same year, R. R. Livingston wrote to Adams: "It is 1 Wells, Life of Samuel Adams, i, 157. See True Sentiments of America, 18, 68, 76, published by Almon (London, 1768).

Bigelow, Works of Franklin, v, 324-325.

Works of John Adams, iv, 20.

4 W. Robertson, History of America (London 1777). See iii, 173, of the edition of 1824.

History of the American Revolution, 47, 51 (Philadelphia, 1789).

Lodge, Works of Hamilton, i, 266.

Sparks, Diplomatic Correspondence of the American Revolution, vii, 5 (Boston, 1829-1830).

extremely difficult in a country so little used to taxes as ours is to levy them directly." This is the first instance that the writer has been able to discover in which an American made use of such a term. In a case of this sort it is proverbially difficult to establish a universal negative; but it is believed that the use of this distinction cannot be traced to a period much earlier than 1782.

Early in 1783, James Wilson, in Congress, spoke1 of the "direct manner in which taxes in this country had been laid." In 1785 and 1786, similar terms can be found in letters of Madison and King.2 In Massachusetts, a law of November 17, 1786, imposing an excise duty upon carriages, declared, in its preamble, that it was advisable "to ease the people as much as possible of direct taxation."

In January, 1787, Hamilton,3 in his speech in the New York Assembly, used the expression "indirect taxation." In a letter written in June of the same year, Theodore Sedgwick dwelt upon "the burdens of direct taxation."4 A writer in the American Museum for the same month used a similar expression. In the federal convention, Gouverneur Morris introduced his proposition relating to direct taxation upon the twelfth of July. A fortnight before that date, Hugh Williamson had stated that it would be difficult for Congress to "exercise direct taxation." Williamson

contributed to the August number of the American Museum an article in which he explained the difference between direct and indirect taxes. We have no means of determining whether this article was written before or after the discussion of Morris' proposition.

We may conclude, then, that the words direct and indirect taxes were gradually coming into use at the time when the federal convention met. In view of the fact that this was the time when Hamilton and many others had begun to study care

1 Elliot, Debates, v, 32.

Writings of James Madison, i, 149, 226, 266; Life and Correspondence of Rufus King, i, 190.

Lodge, Works of Hamilton, ii, 40.

4 In Life and Correspondence of King, i, 224.

American Museum, i, 432.

Elliot, Debates, i, 459.

↑ American Museum, ii, 122.