The term direct tax generally means a tax paid directly to the government by the persons on whom it is imposed.
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General meaning
In the general sense, a direct tax is one paid directly to the government by the persons (juristic The term legal person is a concept in philosophy of law topics wherein an entity is regarded by law to be like a person with such status being granted legal rights to protections and/or privileges under law. It is a term found in business-corporate law and animal rights law contexts, wherein corporations are regarded as highly productive human or natural In jurisprudence, a natural person is a human being, as opposed to an artificial, legal or juristic person, i.e., an organization that the law treats for some purposes as if it were a person distinct from its members or owner) on whom it is imposed (often accompanied by a tax return filed by the taxpayer). Examples include some income taxes An income tax is a tax levied on the income of individuals or business . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate tax, corporate income tax, or profit tax. Individual, some corporate taxes Corporate tax or company tax refers to a tax imposed on entities that are taxed at the entity level in a particular jurisdiction. Such taxes may include income or other taxes. The tax systems of most countries impose an income tax at the entity level on certain type of entities (company or corporation). Many systems additionally tax owners or, and transfer taxes In a narrow legal sense, a transfer tax is essentially a transaction fee imposed on the transfer of title to property. This kind of tax is typically imposed where there is a legal requirement for registration of the transfer, such as transfers of real estate, shares, or bond. Examples of such taxes include some forms of stamp duty, real estate such as estate (inheritance) tax and gift tax. In this sense, a direct tax is contrasted with an indirect tax In the colloquial sense, an indirect tax (such as sales tax, value added tax , or goods and services tax (GST)) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). The intermediary later files a tax return and forwards the tax proceeds to or "collected" tax (such as sales tax A sales tax is a consumption tax charged at the point of purchase for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale. A portion of the sale may be exempt from the calculation of tax, because sales tax laws usually contain a list of exemptions. Laws governing the tax may or value added tax Value added tax is similar to a sales tax. It is a tax on the estimated market value added to a product or material at each stage of its manufacture or distribution, ultimately passed on to the consumer. Maurice Lauré, Joint Director of the French Tax Authority, the Direction générale des impôts, was first to introduce VAT on April 10, 1954, (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] |
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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 Property tax, or millage tax, is an ad valorem tax that an owner is required to pay on the value of the property being taxed. Property tax can be defined as "generally, tax imposed by municipalities upon owners of real property within their jurisdiction based on the value of such property." There are three species or types of property: imposed on the person owning the property as of January 1st of each year) as well as a capitation (a "head tax").[4] In the late 1800s, 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 An excise or excise tax may be defined broadly as an inland tax on the production for sale; or sale, of a specific good, or narrowly as a tax on a good produced for sale, or sold, within the country. Excises are distinguished from customs duties, which are taxes on importation. Excises, whether broadly defined or narrowly defined, are inland taxes," is an "event" tax. In this sense, a transfer tax (such as gift tax In economics, a gift tax is the tax on money or property that one living person gives to another. The United States Internal Revenue Service says a gift is "Any transfer to an individual, either directly or indirectly, where full consideration is not received in return." Many gifts are not subject to tax, or are exempted from taxation and estate tax An inheritance tax is a tax which arises on the death of an individual. It is a tax on the estate, or total value of the money and property, of a person who has died. In international tax law, there is a distinction between an estate tax and an inheritance tax: an estate tax taxes the personal representatives of the deceased, while an inheritance) is an indirect tax. Income taxes on income from personal services such as wages are also indirect taxes in this sense.[6] The United States Court of Appeals for the District of Columbia Circuit The United States Court of Appeals for the District of Columbia Circuit known informally as the D.C. Circuit, is the federal appellate court for the U.S. District Court for the District of Columbia. Appeals from the D.C. Circuit, as with all the U.S. Courts of Appeals, are heard on a discretionary basis by the Supreme Court. It should not be 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."[7]
In the United States ^ b. English is the de facto language of American government and the sole language spoken at home by 80% of Americans age five and older. Spanish is the second most commonly spoken language, Article I, Section 9 Article One of the United States Constitution describes the powers of Congress, the legislative branch of the federal government 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 Pollock v. Farmers' Loan & Trust Company, 157 U.S. 429 , aff'd on reh'g, 158 U.S. 601 (1895), was an important case in which the Supreme Court of the United States ruled that the unapportioned income taxes on interest, dividends, and rents imposed by the Income Tax Act of 1894 were, in effect, direct taxes, and were unconstitutional because ruling (essentially, that taxes on income from property should be treated as direct taxes), this provision made it difficult for Congress The United States Congress is the bicameral legislature of the federal government of the United States of America, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C to impose a national income tax An income tax is a tax levied on the income of individuals or business . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate tax, corporate income tax, or profit tax. Individual that applied to all forms of income until the 16th Amendment The Sixteenth Amendment to the United States Constitution allows the Congress to levy an income tax without apportioning it among the states or basing it on Census results. This amendment exempted income taxes from the constitutional requirements regarding direct taxes, after income taxes on rents, dividends, and interest were ruled to be direct 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).[8]
References
Sources
- Foster, Robert (1895). Commentaries on the Constitution of the United States: Historical and Judicial. 1. Boston: The Boston Book Co.. pp. 415–423. http://books.google.com/books?id=Rd49AAAAIAAJ&printsec=titlepage&source=gbs_summary_r&cad=0#PPA415,M1.
Notes
- ^ Britannica Online, Article on Taxation. See also Financial Dictionary Online, Article on Direct taxes.
- ^ The Address and Reasons of Dissent of the Minority of the Convention, of the State of Pennsylvania, to their constituents.
- ^ 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).
- ^ 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 Brushaber v. Union Pacific Railroad, 240 U.S. 1 , was a landmark United States Supreme Court case in which the Court upheld the validity of a tax statute called the Revenue Act of 1913, also known as the Tariff Act, Ch. 16, 38 Stat. 166 (Oct. 3, 1913), enacted pursuant to Article I, section 8, clause 1 of, and the Sixteenth Amendment to, the, 240 U.S. 1 (1916) (hereinafter Brushaber).
- ^ Pollock v. Farmers' Loan & Trust Co. Pollock v. Farmers' Loan & Trust Company, 157 U.S. 429 , aff'd on reh'g, 158 U.S. 601 (1895), was an important case in which the Supreme Court of the United States ruled that the unapportioned income taxes on interest, dividends, and rents imposed by the Income Tax Act of 1894 were, in effect, direct taxes, and were unconstitutional because, 157 U.S. 429, aff'd on reh'g, 158 U.S. 601 (1895) (hereinafter Pollock).
- ^ See generally Pollock.
- ^ 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 In the third meaning, an obiter dictum is a remark or observation made by a judge that, although included in the body of the court's opinion, does not form a necessary part of the court's decision. In a court opinion, obiter dicta include, but are not limited to, words "introduced by way of illustration, or analogy or argument." Unlike).
- ^ 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. The Internal Revenue Code is the main body of domestic statutory tax law of the United States organized topically, including laws covering the income tax (see Income tax in the United States), payroll taxes, gift taxes, estate taxes and statutory excise taxes. The Internal Revenue Code is published as Title 26 of the United States Code (USC), and § 7201 affirmed by the United States Court of Appeals for the Third Circuit It also has appellate jurisdiction over the District Court of the Virgin Islands which, in spite of the name, is a territorial court and belongs to no federal judicial district; 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. The Internal Revenue Code is the main body of domestic statutory tax law of the United States organized topically, including laws covering the income tax (see Income tax in the United States), payroll taxes, gift taxes, estate taxes and statutory excise taxes. The Internal Revenue Code is published as Title 26 of the United States Code (USC), and § 61 ruled by the United States Court of Appeals for the Sixth Circuit The court is composed of sixteen active judges and is based at the Potter Stewart U.S. Courthouse in Cincinnati, Ohio. It is one of thirteen United States courts of appeals 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
- Indirect tax In the colloquial sense, an indirect tax (such as sales tax, value added tax , or goods and services tax (GST)) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). The intermediary later files a tax return and forwards the tax proceeds to
- United Kingdom Corporation Tax Corporation tax is a tax levied in the United Kingdom on the profits made by companies and on the profits of permanent establishments of non-UK resident companies and associations that trade in the EU. Prior to the tax's enactment on 1 April 1965, companies and individuals paid the same income tax, with an additional profits tax levied on
- Income tax in the United States The federal government of the United States imposes a progressive tax on the taxable income of individuals, partnerships, companies, corporations, trusts, decedents' estates, and certain bankruptcy estates. Some state and municipal governments also impose income taxes. The first Federal income tax was imposed during the Civil War, then again in
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