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What's the Limit on Congress's Power to Tax?

Posted By Julia Shaw On June 29, 2012 @ 11:30 am In First Principles | Comments Disabled

The Supreme Court on Thursday introduced lawmakers to a new Obamacare.

The justices held that Congress does not have the power under the Commerce Clause to force you to buy health insurance, even though that’s what lawmakers and the President thought they were doing when they passed the law. Instead, the Court held that Congress may and did impose a mandate as part of its taxing power, even though that’s what policymakers insisted they weren’t doing [1].

That could put an entirely different spin on the mandate since, to put it mildly, taxes have been a big deal in American history.

The American Revolution began as a tax revolt. The issue wasn’t the amount of the taxes; it was the process by which they were levied. Specifically, the colonists objected to “taxation without representation”—Parliament levied taxes without the consent of representatives in the colonists’ local legislatures.

When drafting the Constitution, the Framers sought to rectify this issue. They gave Congress the power to levy indirect taxes and direct taxes.

The Framers did not want states, interests, or industries to use the national legislature to burden other states, interests, or industries unjustly. Therefore, the Constitution creates certain limitations on indirect taxes and direct taxes: Indirect taxes are subject to the Uniformity Clause [2], and direct taxes are subject to apportionment [3].

Indirect taxes [4] were meant to fund the national government in ordinary circumstances. These included “Duties, Imposts, and Excises”—generally, taxes on articles of consumption. If Congress raised rates too high, then people would not purchase the taxed goods, and revenue would decrease.

Direct taxes [5] did not have the built-in protections characteristic of indirect taxes. Direct taxes were imposed directly on individuals, who cannot shift their liability to others. To guard against abuse, direct taxes must be apportioned. The 16th Amendment [6] empowered Congress to lay direct taxes on income without being apportioned.

For more information on Congress’s taxing power, check out ConstitutionOnline.com [7].


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2012/06/29/whats-the-limit-on-congresss-power-to-tax/

URLs in this post:

[1] insisted they weren’t doing: http://www.foxnews.com/politics/2012/06/28/obama-on-whether-individual-mandate-is-tax-it-is-absolutely-not/

[2] Uniformity Clause: http://www.heritage.org/constitution#!/articles/1/essays/35/uniformity-clause

[3] apportionment: http://www.heritage.org/constitution#!/articles/1/essays/64/direct-taxes

[4] Indirect taxes: http://www.heritage.org/constitution#!/search/tax/topics/77/articles/1/essays/35/uniformity-clause

[5] Direct taxes: http://www.heritage.org/constitution#!/search/tax/topics/77/articles/1/essays/64/direct-taxes

[6] 16th Amendment: http://www.heritage.org/constitution#!/search/tax/topics/77/amendments/16/essays/177/income-tax

[7] ConstitutionOnline.com: http://www.heritage.org/constitution#!/search/tax/topics/77/taxes

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