Yes, A National Sales Tax is Constitutional

Some have questioned whether a national sales tax is Constitutionally permissible (without an amendment). The answer is yes.

Milton Wolf is among those who question this: “Mr. [Herman] Cain’s 9 percent national sales tax [and by extension any other national sales tax] simply isn’t constitutional. Among the enumerated powers in our Constitution, there is no federal jurisdiction over the purchases you make at your local stores, aside from those involving interstate transactions.”

But it turns out I looked this up in the course of researching my article forThe Objective Standard“‘Fair Tax’ Looks Ugly in the Details.” (See also my more detailed follow-up article on the same topic.)

While I am no expert on the Constitution, thankfully we in Colorado have just such an expert now working in the state: Rob Natelson. (Recently Natelson delivered a seminar on the Constitution with Dave Kopel.)

In his book The Original Constitution (Second Edition), Natelson discusses the types of taxation permitted under the Constitution (see pages 158-161). He mentions the two relevant sections of the Constitution (as originally written):

Article I, Section 2, Clause 3

Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons [etc.; this section was modified by the Fourteenth Amendment].

Article I, Section 9, Clause 4

No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken. [This section was modified by the Sixteenth Amendment.]

Of course, the other obviously relevant section is Article I, Section 8: “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises…”

The question is whether a national sales tax constitutes a “direct” or an “indirect” tax. Based on Natelson’s remarks, I counted it as an “indirect” one:

Direct taxes included capitations and levies on real property, business assets, and other capital items, on the ownership of basic household necessities, and on wages, rents, and other income. Probably taxes on wealth (such as inheritance and estate taxes) were direct. Indirect taxes were exactions on imports and on consumable goods and services. This line of division was not flawless, for an import duty probably was indirect even if imposed on an item destined to serve as a capital good. (p. 161)

I wasn’t entirely sure of my interpretation, so I asked Natelson whether a “sales tax [is] an ‘indirect’ tax and therefore constitutionally allowed.”

He replied, “Yes. A national sales tax is clearly constitutional, so long as uniform throughout the country.”

He was quick to point out that his evaluation of the Constitutional matter did not reflect his opinion of a national sales tax.

I will state flatly: even though a national sales tax is Constitutionally allowed, it is still a really, truly, horrendously stupid idea, at least if enacted without repealing the Sixteenth Amendment (which permits the income tax). The worst situation we could possibly end up with (in terms of taxation) would be a national sales tax added to a national income tax. One or the other is bad enough, but both would cripple the economy and severely infringe our liberty.