The foregoing line of cases, concluding with the emphatic assertion of a unanimous court in Springer v. United States, justly gave rise to the general opinion that the only taxes to be deemed direct taxes within the constitutional meaning of the term were capitation taxes and taxes on real estate. However, in the so-caDed Income Tax Case - Pollock v. Farmers' Loan and Trust Co.'7 - decided in 1895, this doctrine was overthrown, the court upon the first hearing holding that taxes on the rents or income of real estate are direct taxes; and, upon a rehearing, holding that taxes on personal property or on the income derived from personal property are equally direct.

Upon the first hearing the crucial point was, of course, whether a tax upon the income derived from real estate was distinguish-'

70 102 U. S. 586; 26 L. ed. 253.

77 157 U. S. 429; 15 Sup. Ct. Rep. 673; 39 L. ed. 759, and 158 U.S. 601; 15 Sup. Ct. Rep. 912; 39 L. ed. 1108.

able from a tax on the real estate itself. This being decided in the negative, it necessarily followed that inasmuch as a tax on the real estate is admittedly a direct tax, a tax on the income derived therefrom would be direct. "The real question is," the majority justices declare, "is there any basis upon which to rest the contention that real estate belongs to one of the two great classes of taxes, and the rent or income which is the incident of its ownership belongs to the other? We are unable to perceive any ground for the alleged distinction. An annual tax upon the annual value or annual user of real estate appears to us the same in substance as an annual tax on the real estate, which would be paid out of the rent or income." 78

78 In a dissenting opinion, concurred in by Justice Harlan, Justice White, after a review of the earlier adjudications, says:

"The facts, then, are briefly these: At the very birth of the government a contention arose as to the meaning of the word 'direct.' That controversy was determined by the legislative and executive departments of the government. Their action came to this court for review, and it was approved. Every judge of this court who expressed an opinion, made use of language which clearly showed that he thought that the word 'direct' in the Constitution applied only to capitation taxes and taxes directly on land. Thereafter the construction thus given was accepted everywhere as definite. The matter came again and again to this court, and in every case the original ruling was adhered to. The suggestions made in the Hylton case were adopted here, and in the last case here decided, reviewing all the others, this court said that direct taxes within the meaning of the Constitution were only taxes on land and capitation taxes. And now, after a hundred years, after long continued action by other departments of the government, and after repeated adjudications of this court, this interpretation is overthrown, and the Congress is declared not to have a power of taxation which may at some time, as it has in the past, prove necessary to the very existence of the government. By what process of reasoning is this to be done? By resort to theories, in order to construe the word 'direct' in its economic sense, instead of in accordance with its meaning in the Constitution, when the very result of the history which I have thus briefly recounted is to show that the economic construction of the word was repudiated by the framer6 themselves, and has been time and time again rejected by this court: by a resort to the language of the framers and a review of their opinions, although the facts plainly show that they themselves settled the question which the court now virtually unsettles. In view of all that has taken place and of the many decisions of this court, the matter at issue here ought to be regarded as closed forever. ... It is said that a tax on the rentals is a tax on the land, as if the Act here under consideration imposed an immediate tax on the rentals. This statement, I

A rehearing of the case having been allowed the court broadened still further the scope of the term "direct taxes," making it include taxes on personal property and upon the income therefrom. To this doctrine four justices dissented.

In Nicol v. Ames79 the scope of the doctrine laid down in the Income Tax Case was clearly stated. In this case it was argued that a duty levied by the War Revenue Act of 1898 upon sales or agreements of sale of products or merchandise at exchanges or boards of trade was a direct tax and as such unconstitutional because not properly apportioned. The court, however, held that the tax was in the nature of a duty or excise tax for the privilege of doing business at such places and not a tax on the products or merchandise sold, and, therefore, not a direct tax. The court say: "It is asserted to be a direct tax, because it is a tax upon the sale of property measured by the value of the thing sold, and such a tax is a direct tax upon the property itself, and, therefore, subject to the rule of apportionment. Various cases are cited, from Brown v. Maryland (12 Wheat. 419; 6 L. ed. 678) down to those involving the validity of the income tax (Pollock v. Trust Co., 157 IT. S. 429; 15 Sup. Ct. Rep. 673; 39 L. ed. 759) for the purpose of proving the correctness of this proposition. All the cases involved the question whether the taxes to which objection was taken amounted practically to a tax on the property. If this tax is not on the property, or on the sale thereof, then these cases do not apply."

In Patton v. Brady80 a tax upon tobacco, however prepared, manufactured, and sold, for consumption or sale, was held not a direct tax but an excise tax, - "not a tax upon property as such, submit, is a misconception of the issue. The point involved is whether a tax on net income, when such income is made up by aggregating all sources of revenue and deducting repairs, insurance, losses in business, exemptions, etc., becomes, to the extent to which real estate revenues may have entered into the gross income, a direct tax on the land itself. In other words, does that which reaches an income, and thereby reaches rentals indirectly, and reaches the land by a double indirection, amount to a direct levy on the land itself? It seems to me the question when thus accurately stated furnishes its own negative response."

79 173 U. S. 509; 19 Sup. Ct. Rep. 522; 43 L. ed. 786.

80 184 U. S. 608; 22 Sup. Ct. Rep. 493; 46 L. ed. 713.

but upon certain kinds of property, having reference to their origin and intended use."

In Spreckles Sugar Refining Co. v. McClain81 the special excise tax imposed on sugar refining by the act of 1898, and measured by the gross annual receipts in excess of a named sum, was held to be not a direct tax. "Clearly," the court say, "the tax is not imposed upon gross annual receipts as property, but only in respect of the carrying on or doing the business of refining sugar. It cannot be otherwise regarded because of the fact that the amount of the tax is measured by the amount of the gross annual receipts."