Direct tax
From Wikipedia, the free encyclopedia
The term direct tax has more than one meaning: a colloquial meaning and, in the United States, a constitutional law meaning. Certain taxes may be direct taxes in the colloquial sense but indirect taxes in the constitutional sense.
In the colloquial sense, a direct tax is one paid directly to the government by the persons (legal 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.
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" as well as a capitation (a "head tax"). In the late 1800s, U.S. courts also began to treat an income tax on income from property as a direct tax.
In this U.S. constitutional law sense, an "indirect tax," or "excise," is an "event" tax. 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.
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; 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).
