Was Polllock v. Farmers’ Loan & Trust Co (1895) decided correctly?

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Were the premises the Supreme Court employed correct in 1895?

Pollock v. Farmers’ Loan & Trust Company, 157 U.S. 429 (1895), affirmed on rehearing, 158 U.S. 601 (1895) was a key case in the history of taxation and tax law in the United States.

Theoretically, the key question is whether a tax on property is the same as “dividends, royalties, and rents” arising from that property.

Chief Justice Fuller of the Supreme Court wrote that:

First. We adhere to the opinion already announced — that, taxes on real estate being indisputably direct taxes, taxes on the rents or income of real estate are equally direct taxes.

Second. We are of opinion that taxes on personal property, or on the income of personal property, are likewise direct taxes.

Third. The tax imposed by sections 27 to 37, inclusive, of the act of 1894, so far as it falls on the income of real estate, and of personal property, being a direct tax, within the meaning of the constitution, and therefore unconstitutional and void, because not apportioned according to representation, all those sections, constituting one entire scheme of taxation, are necessarily invalid.

The decrees hereinbefore entered in this court will be vacated. The decrees below will be reversed, and the cases remanded, with instructions to grant the relief prayed.

First, it must be defined what a direct tax and indirect tax is in the context of the 1895 decision. It should be noted that the concept of direct taxation and indirection taxation are different in the modern day.

Today, a direct tax is on income a person earns or on property and an indirect tax is on a transaction. Indirect taxes often take the form of sales taxes, such as GST or VAT.

However, these ideas were not the definitions as the Pollock case uses them. In the Pollock case a direct tax is a tax levied on property. In this context, the direct tax is levied directly on property. Indirect taxes in the Pollock case are taxes levied on income — presumably on types of income that are earned through wages.

A Harvard Law Review article summarizing the Pollock case from the same year the case was decided states that:

“The clause in the Constitution regarding direct taxes was the result of a compromise between conflicting views, “resting on the doctrine that the right of representation ought to be conceded to every community on which a tax is to be imposed, but crystallizing it in such form as to allay jealousies in respect of the future balance of power; to reconcile conflicting views in respect of the enumeration of slaves; and to remove the objection that, in adjusting a system of representation between the States, regard should be had to their relative wealth, since those who were to be most heavily taxed ought to have a proportionate influence in the government. The compromise, in embracing the power of direct taxation, consisted not simply in including part of the slaves in the enumeration of population, but in providing that as between State and State such taxation should be proportioned to representation.””[1]

Thus, the key to the case was determining whether the tax was an indirect tax or a direct tax. If the tax were a direct tax, according to the Constitution, it would have to apportioned to the states through the Apportionment Clause.

The Supreme Court decided that the tax levied was a direct tax. The Supreme Court equivocated taxes on property, such as a property tax, with income earned from “dividends, royalties, and rents” derived from such property. An example of such an equivocation would be that simply owning a property and living in it would be equivalent to renting that property as a landlord. Both situations for tax purposes, according to the 1895 Supreme Court, were equivocal and thus to be taxed the same.

It seems that rents derived from property are different from merely having a property and not using it for economic gains.

In a historical and political context, it should be noted that the monied interest of the United of States was in the property landholders, not the wage earners. However, in the modern day most of the income revenue received by the IRS is from wage earners. Perhaps this context may explain the result. Was Pollock decided on a political basis to allow property landowners from paying income tax?

Perhaps viewing the legislative history of the Constitutional provision of the Apportionment Clause would make sense. Hamilton’s writings and the Federalist Papers may provide an answer.

Hamilton wanted to create the Treasury Department in order to raise revenue for the government.[2] The purpose of the Treasury Department was to allow the United States government to incur a national debt — Hamilton suggested to President Washington that Congress adopt the debts of every individual state through a national bank. [3] The reason for having a national debt was to create a “credit rating” for the early Republic.[4] This “credit rating” referred to at the time as simply “credit” would allow the United States to engage in riskier levels and volumes of international trade.[5] Hamilton believed that the systems of international trade would ensure the future prosperity of the United States.[6]

Incidentally, the Apportionment Clause seems to have been inserted without the proposer of the clause seriously wishing it to be inserted — the proposer of the Clause suggested it to resolve another issue. According to the Springer v. United States (1881) case, Gouverneur Morris suggested the Clause to resolve a “debate” about slavery. It is unclear to the 1881 Supreme Court what that debate was on slavery, but it likely had to do with how the population was to be represented in Congress based on the slave population. However, this is not clear. What is clear is that Gouverneur Morris suggested the Apportionment clause as a “bridge” to solve that debate on slavery, but after that debate on slavery was complete, Gouverneur Morris did not see a purpose for the Apportionment Clause to remain. In any case, the Constitutional Convention kept the clause. Thus, the legislative history is unclear — and perhaps not applicable given that chattel slavery no longer existed at the time of the Springer case.

Thus, perhaps the answer to whether the framers of the Constitution intended for taxes on property (property taxes) to be equivocal to “interest, dividends and rents” is unclear based on the legislative and Constitutional History of the Apportionment Clause as found in James Madison’s notes of the Constitutional Convention. Granted what was discussed as a whole is not clear and it likely would not be accurate to speculate as to what was discussed.

Next, perhaps case law and the common law history of cases discussing the Apportionment Clause may be helpful.

The earliest case dealing with the Apportionment Clause is Hylton v. United States, 3 U.S. (3 Dall.) 171 (1796). Notably, Alexander Hamilton argued before the Supreme Court for the United States for approximately three hours.

The Hylton case dealt with whether Congress had the ability to levy a tax on property specifically carriages. The question was whether this property was a direct tax and must be apportioned under the first article of the Constitution of the United States. The Supreme Court ultimately decided that the tax on carriages, which is a tax on the possession of goods, was not a tax that would be considered a direct tax. Thus the tax on the possession of goods did not have to be apportioned under the Apportionment Clause. The court stated that tax on land would be considered a direct tax. It is interesting to note that the Supreme Court did not have a clear conception of what tax and taxation should mean in the new republic. Justice Samuel Chase, wrote that the United States Supreme Court should consider the concept of taxes as they were understood in great Britain.

It is interesting to note that this case was decided before the concept of judicial review was granted by the Supreme Court in 1803 under the famous Marbury v. Madison decision. The court considered the concept of whether the Supreme Court in the judiciary as a whole have the power under the United States Constitution to declare an act of the United States Congress as unconstitutional. Ultimately in this specific case the Supreme Court did not have to declare that the active Congress tax and carriages was unconstitutional. So ultimately the court did not have to decide on the question of judicial review. However it is interesting to note that by simply stating that an act is valid under the constitution seems to be unequivocal power to being able to say that it is unconstitutional. The only difference is the practicalities of effect — that the text to be unconstitutional would be a practical effect of judicial review. This ultimately the Supreme Court in 1796 did not have to decide whether the Supreme Court in the judiciary had the power to nullify an act of Congress. This would be decided a few short years later.

Ultimately the question in the 1796 Hylton case was clear that a direct tax on property was directly on property and ultimately came to a seemingly opposite decision than that identified in the 1895 Pollock case. Thus, it seems fair to say that the 1825 decision overturned previous caselaw. Based on precedent, it seems that the 1895 case did not indeed follow the precedent laid down earlier

Thus far this article has reviewed:

· The definition of the terms in the case itself to understand the language itself,

· The legislative and Constitutional history of the terms to understand the purpose and intent of the Apportionment Clause, and

· The case law history — from Hylton, and Springer to find how the Supreme Court has interpreted the issue in the past.


However, it does not seem clear that Pollock case decided the case because:

· The terms themselves seem inconsistently defined and applied,

· The legislative history is not clear at best and seemingly contradictory itself or irrelevant to taxation (it was meant to deal with other issues), and

· The case law itself seems to draw upon the opposite conclusion.

The way it seems Pollock was accurately decided is if you accept the premise of the Court’s definition of what constitutes a direct tax. Accepting this premise does not seem reasonable based off the definition of the words themselves, the legislative history, and earlier case law dealing with the terms.

[1] Francis R. Jones, Pollock v. Farmers’ Loan and Trust Company, 9 Harv. L. Rev. 198, 200–01 (1895).

[2] The concepts in this paragraph are wonderfully summarized in the John Adams HBO series — https://www.youtube.com/watch?v=notJuFGXQ9w

[3] The concepts in this paragraph are wonderfully summarized in the John Adams HBO series — https://www.youtube.com/watch?v=notJuFGXQ9w

[4] The concepts in this paragraph are wonderfully summarized in the John Adams HBO series — https://www.youtube.com/watch?v=notJuFGXQ9w

[5] The concepts in this paragraph are wonderfully summarized in the John Adams HBO series — https://www.youtube.com/watch?v=notJuFGXQ9w

[6] The concepts in this paragraph are wonderfully summarized in the John Adams HBO series — https://www.youtube.com/watch?v=notJuFGXQ9w. Alternatively, one can view the same sentiments in the Federalist Papers — specifically Federalist Paper 51.

https://www.americamagazine.org/arts-culture/2008/03/24/man-all-seasons-john-adams-parts-vi-vii-reviewed (“That the positions of Jefferson and Hamilton may be irreconcilable does not occur to Adams. And so it is that in this attempted via media the viewer glimpses a curious paradox in Adams’ complex character: He is a realist, agreeing with Hamilton that “if men were angels than no government would be necessary,” yet he is at the same time hobbled by an almost quaint naïveté regarding the intentions of both men. He pleads with Jefferson to compromise and gives moral force to his plea with an appeal to their long friendship. It is as if Adams thinks that nostalgia alone could somehow counter the powerful forces at work.”)

© Charles Edward Andrew Lincoln IV

Charles Edward Andrew Lincoln IV’s interests are in tax law. He enjoys spending time with his grandmother and going on walks through the park with her.


Renaissance literature, Shakespeare, Hegelian dialectics, Attic Greek, masters University of Amsterdam.