Direct tax

Direct tax

The term direct tax generally means a tax paid directly to the government by the persons on whom it is imposed.


General meaning

In the general sense, a direct tax is one paid directly to the government by the persons (juristic or natural) on whom it is imposed (often accompanied by a tax return filed by the taxpayer). Examples include some income taxes, some corporate taxes, and transfer taxes such as estate (inheritance) tax and gift tax. In this sense, a direct tax is contrasted with an indirect tax or "collected" tax (such as sales tax or value added tax (VAT)); a "collected" tax is one which is collected by intermediaries who turn over the proceeds to the government and file the related tax return. Some commentators have argued that "a direct tax is one that cannot be shifted by the taxpayer to someone else, whereas an indirect tax can be."[1]

An 18th century writing about the tax explained:

The power of direct taxation applies to every individual, as congress under this government is expressly vested with the authority of laying a capitation or poll-tax upon every person to any amount. This is a tax that, however oppressive in its nature, and unequal in its operation, is certain as to its produce and simple in it collection; it cannot be evaded like the objects of imposts or excise, and will be paid, because all that a man hath will he give for his head. This tax is so congenial to the nature of despotism, that it has ever been a favorite under such governments. Some of those who were in the late general convention from this state, have long labored to introduce a poll-tax among us.

The power of direct taxation will further apply to every individual, as congress may tax land, cattle, trades, occupations, &c. to any amount, and every object of internal taxation is of that nature, that however oppressive, the people will have but this alternative, either to pay the tax, or let their property be taken for all resistance will be vain. The standing army and select militia would enforce the collection.[2]

U.S. constitutional law sense

In the United States, the term "direct tax" has a different meaning for the purposes of constitutional law. Traditionally, a direct tax in the constitutional sense means a tax on property "by reason of its ownership"[3] (such as an ordinary real estate property tax imposed on the person owning the property as of January 1 of each year) as well as a capitation (a "head tax").[4] In the late 19th century, U.S. courts also began to treat an income tax on income from property as a direct tax.[5] In U.S. constitutional law, an "indirect tax" or "excise" is an "event" tax.[6] In this sense, a transfer tax (such as gift tax and estate tax) is an indirect tax. Income taxes on income from personal services such as wages are also indirect taxes in this sense.[7] The United States Court of Appeals for the District of Columbia Circuit has stated: "Only three taxes are definitely known to be direct: (1) a capitation [ . . . ], (2) a tax upon real property, and (3) a tax upon personal property."[8]

In the United States, Article I, Section 9 of the Constitution requires that direct taxes imposed by the national government be apportioned among the states on the basis of population. After the 1895 Pollock ruling (essentially, that taxes on income from property should be treated as direct taxes), this provision made it difficult for Congress to impose a national income tax that applied to all forms of income until the 16th Amendment was ratified in 1913. After the Sixteenth Amendment, no Federal income taxes are required to be apportioned, regardless of whether they are direct taxes (taxes on income from property) or indirect taxes (all other income taxes).[9]




  1. ^ Britannica Online, Article on Taxation. See also Financial Dictionary Online, Article on Direct taxes.
  2. ^ The Address and Reasons of Dissent of the Minority of the Convention, of the State of Pennsylvania, to their constituents.
  3. ^ See, e.g., the United States Supreme Court case of Fernandez v. Wiener, in which the Court stated that a direct tax is a tax "which falls upon the owner merely because he is owner, regardless of his use or disposition of the property." Fernandez v. Wiener, 326 U.S. 340, 66 S. Ct. 178, 45-2 U.S. Tax Cas. (CCH) ¶10,239 (1945).
  4. ^ A capitation is defined as a "poll tax". Black's Law Dictionary, p. 191 (5th ed. 1979). A poll tax is defined as a "capitation tax; a tax of a specific sum levied upon each person within the jurisdiction of the taxing power and within a certain class (as, all males of a certain age, etc.) without reference to his property or lack of it." Black's Law Dictionary, p. 1043 (5th ed. 1979). For background, see generally Pacific Ins. Co. v. Soule, 74 U.S. 433 (1868); and Brushaber v. Union Pacific Railroad, 240 U.S. 1 (1916) (hereinafter Brushaber).
  5. ^ Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429, aff'd on reh'g, 158 U.S. 601 (1895) (hereinafter Pollock).
  6. ^ Also, see generally subsection (d), paragraph (3) of 26 U.S.C. § 7602. See also 26 U.S.C. § 2056A, subsection (b); 26 U.S.C. § 2701, subsection (d); 26 U.S.C. § 4961; 26 U.S.C. § 4962; 26 U.S.C. § 4963.
  7. ^ See generally Pollock.
  8. ^ Opinion on rehearing, July 3, 2007, p. 20, Murphy v. Internal Revenue Service and United States, case no. 05-5139, United States Court of Appeals for the District of Columbia Circuit, 2007-2 U.S. Tax Cas. (CCH) paragr. 50,531 (D.C. Cir. 2007) (dicta).
  9. ^ See generally Brushaber, above. In the context of income taxes on wages, salaries and other forms of compensation for personal services, see, e.g., United States v. Connor, 898 F.2d 942, 90-1 U.S. Tax Cas. (CCH) paragr. 50,166 (3d Cir. 1990) (tax evasion conviction under 26 U.S.C. § 7201 affirmed by the United States Court of Appeals for the Third Circuit; taxpayer's argument -- that because of the Sixteenth Amendment, wages were not taxable -- was rejected by the Court; taxpayer's argument that an income tax on wages is required to be apportioned by population also rejected); Perkins v. Commissioner, 746 F.2d 1187, 84-2 U.S. Tax Cas. (CCH) paragr. 9898 (6th Cir. 1984) (26 U.S.C. § 61 ruled by the United States Court of Appeals for the Sixth Circuit to be "in full accordance with Congressional authority under the Sixteenth Amendment to the Constitution to impose taxes on income without apportionment among the states"; taxpayer's argument that wages paid for labor are non-taxable was rejected by the Court, and ruled frivolous).

See also

Wikimedia Foundation. 2010.

Игры ⚽ Нужна курсовая?

Look at other dictionaries:

  • direct tax — ➔ tax1 * * * direct tax UK US noun [C or U] TAX ► a tax on income, rather than on goods or services that are bought: »The government has lowered direct tax rates for individuals and companies. direct taxation noun [U] ► TAX » …   Financial and business terms

  • Direct tax — Direct Di*rect , a. [L. directus, p. p. of dirigere to direct: cf. F. direct. See {Dress}, and cf. {Dirge}.] 1. Straight; not crooked, oblique, or circuitous; leading by the short or shortest way to a point or end; as, a direct line; direct means …   The Collaborative International Dictionary of English

  • direct tax — n: a tax imposed on a taxpayer himself or herself or on his or her property compare excise Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. direct tax …   Law dictionary

  • direct tax — direct taxes N COUNT A direct tax is a tax which a person or organization pays directly to the government, for example income tax …   English dictionary

  • direct tax — n. a tax levied directly on the person by whom it is to be paid, as an income tax or inheritance tax …   English World dictionary

  • direct tax — direct′ tax′ n. bus a tax, as an income or property tax, exacted directly from the persons who will bear the burden of it • Etymology: 1785–90, amer …   From formal English to slang

  • direct tax — ► NOUN ▪ a tax, such as income tax, which is levied on the income or profits of the person who pays it …   English terms dictionary

  • Direct Tax — A tax that is paid directly by an individual or organization to the imposing entity. A taxpayer pays a direct tax to a government for different purposes, including real property tax, personal property tax, income tax or taxes on assets. Direct… …   Investment dictionary

  • direct tax — noun a tax paid directly by the person or organization on whom it is levied • Hypernyms: ↑tax, ↑taxation, ↑revenue enhancement * * * diˌrect ˈtax f95 [direct tax direct taxation] …   Useful english dictionary

  • direct tax — UK / US noun [countable/uncountable] Word forms direct tax : singular direct tax plural direct taxes economics a tax collected directly from a person or organization rather than as part of the price of a product or service Derived word: direct… …   English dictionary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”