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American Government Lecture Twelve (view source)

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<br>Twelfth Lecture – Trials and Abortion

<br>Instructor, Andy Schlafly

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Review of taxation and Sixteenth Amendment:

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=== Types of taxes ===

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There are two general categories of taxes, "direct" and "indirect".<ref><small>http://www.investorguide.com/article/11164/the-difference-between-direct-tax-and-indirect-tax/</small></ref> A "direct" tax is how the Roman Empire funded itself: each adult must directly pay a certain tax, whether he has income or not (also known as a "head tax" or "capitation tax," because it is applied per person). Jesus and the Apostles had to pay this type of tax, as they were in the Roman Empire. Another example of a "direct" tax is a tax on real estate, which the federal government imposed in its early years but does not anymore. (Now State and local governments impose real estate taxes.)

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Most taxes are "indirect" in nature, such as "excise taxes." An excise tax is based on an activity, such as a sale of a product from a business to a customer. It is a tax on activity rather than on a person or on property itself. An example of indirect or excise federal taxes are the taxes on gasoline and telephone bills.

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The distinction between "direct" and "indirect" taxes is important because the original U.S.Constitution, in Art. I, Section 9, Clause 4, limits "direct" taxes to the federal government to what can be apportioned among the population. This prevents the federal government from taxing wealthy areas or people more than poor areas or people. If a tax is "indirect", then it is not limited by this provision, which enables the federal government to tax business activity without limitation. But with respect to individual income, the Sixteenth Amendment gives the federal government unlimited power to impose taxes in any way it chooses.

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The lawsuits against ObamaCare have reopened this issue because ObamaCare imposes a penalty (under Congress's taxation power) on non-exempt people who fail to purchase adequate health insurance. It is not an income tax, so it should not be authorized by the Sixteenth Amendment. It is not an excise tax, because it applies when there is no activity (declining to purchase government-approved insurance). Is it a "direct" tax? If so, then it would not be allowed unless it is apportioned by population, such that wealthy people pay no more than poor people. But if it is not a direct tax, then Article I, Section 8, Clause 1 may allow it: "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises." Lawsuits are pending to challenge ObamaCare based on what kind of tax it imposes, and the federal courts will be deciding this issue in the next year or so.

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Outline of Lecture:

Aschlafly

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