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University of Iowa School of Law
Ward, Larry D.

Basic Federal Income Taxation
Chapter 1: Introduction
I.        The Constitution and the Income Tax
A.     Apportionment of Direct taxes
1.                  Art I, §2
a)                  Representatives and direct Taxes shall be apportioned among the several States…according to their respective Numbers…
2.                  Art I, §9
a)                  No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.
3.                  16th Amendment (1913): Gives Congress the power to lay and to collect taxes on incomes without apportionment among the several States, and without regard to any census or enumeration.
B.     The Uniformity Clause
1.                  Art. I, §8
a)                  Requires that taxes be “uniform throughout the United States”
2.                  This requirement
a)                  Does not prohibit a progressive tax or a tax that distinguishes between different sources of income.
b)                  Requires that taxes be “geographically uniform” in the sense that “whatever plan or method Congress adopts for laying the tax in question, the same plan and the same method must be operative throughout the United States.”
II.     Basics of the tax system
A.     Federal Income Tax
1.                  Accounts for 65% of Federal revenue
a)                  56%—Personal Income Taxes
b)                  9%—Corporate Income Taxes
B.     Taxes aren’t simply enacted to bring dollars into the treasury, but also to absorb purchasing power from individuals so that inflation won’t rise rapidly
C.     Non-revenue raising purposes of taxes
1.                  Taxes promote certain transactions
a)                  Ie. Charitable donation tax benefits (lead to good educational systems in the United States)
2.                  Redistribution of Wealth
3.                  Stabilize/Stimulate economic growth
D.     Goals of the Tax System
1.                  Fair & Equitable
2.                  Won’t impede productivity/incentive to work

3.                  Sales tax is regressive b/c:
a)                  Applied equally across the board
b)                  But higher incomes don’t spend all their money on consumption so a tax is less of a percentage of their total income
C.     Proportional Tax
1.                  Definition
a)                  Tax takes the same percentage of all incomes
D.     Incidence of a Tax
1.                  Legal incidence: Who physically pays the tax
2.                  Economic incidence: who bears the burden of the tax
Example: Social Security taxes directed at an employer are often shifted to the employee (ie. The employee offers to work for less money so the employer will make the hire eventhough the tax on employment exists) The legal incidence is on the employer, the economic incidence is on the employee.