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DODGE ARTICLE ON CONSTITUTIONAL TESTS FOR TAX PROVISIONS

November 13, 2006

Tax Professor Joseph Dodge has written an analysis of the Constitution's treatment of tax cases. As Professor Dodge's essay in Tax Stories was cited in the government's still-pending request for rehearing in the Murphy case, which held the taxation of non-physical personal injury recoveries unconstitutional, this piece is very timely.

The abstract makes it clear that he believes the Murphy panel got it wrong (emphasis mine):

Among the conclusions reached herein are the following: (1) in general, a federal tax provision is constitutional if it either entails income under the Sixteenth Amendment or results in an indirect tax; (2) Murphy is not a proper case for reaching the indirect tax issue; (3) the Sixteenth Amendment only refers to gross income, and gross income means gross receipts; (4) although there is no constitutional requirement of capital recovery, capital is now limited to basis; (5) there is no basis in human capital or the capacity to enjoy life; (6) emotional suffering does not result from a realized loss of any portion of any asset; (7) a cash receipt cannot be excluded on the theory that it is a substitute for an untaxed psychic state; (8) direct tax is limited to head taxes, mandatory requisitions (taxes on states), and taxes on real estate, all because of their existence; (9) Congress can disallow basis; and (10) Congress can impose personal consumption taxes and personal wealth taxes.

Hat Tip: Legal Theory Blog.

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