Tax Profs Criticize D.C. Circuit Taxing Power Decision

August 24, 2006

ACSBlog recently noted a D.C. Circuit decision holding that an income tax on non-physical damage awards exceeds Congress' power under the Sixteenth Amendment. Over at TaxProf Blog, Professor Paul Caron has assembled commentary from eleven tax law experts on the decision. Their views are almost universally critical.
A common theme in their criticism is concern that the D.C. Circuit opinion closely resembles the arguments of so-called "tax protestors," persons who refuse to pay income taxes on a "mistaken belief, firmly held, that the federal income tax is unconstitutional, invalid, voluntary, or otherwise does not apply to them under one of a number of bizarre arguments . . . ."
Professor Scott Schumacher of the University of Washington asks "what the tax protestors are going to do with the decision," concluding that he's glad he's "not still with the government." Florida Professor Marty McMahon agrees stating "[y]ou better bet the tax protesters are going to jump on that."
Other commentators question the wisdom of the court's resort to originalism in their opinion. As Professor Allan Samansky of Ohio State argues:

What struck me as most interesting (and bizarre) is the conclusion (assumption?) that the "meaning of the [16th] Amendment as it would have been understood by those who framed, adopted, and ratified it" should prevail today. Thus, whatever was not considered to be "income" in 1916 cannot be subject to an income tax today, absent a Constitutional Amendment. Originalism may have its place in interpreting our Constitution, but its use here seems crazy to me. Our understanding of economics has certainly become more sophisticated, but according to at least three judges our income tax is constrained by the notions prevailing ninety years ago. The implications of this approach are dramatic, to say the least.

Professor Stephen Cohen of Georgetown offers a somewhat dissenting view. He believes that "[t]here may be doubtful authority to declare an income tax provision unconstitutional on policy grounds as did the DC Circuit Court in Murphy. However, there is a strong argument that in principle, for policy reasons, the damages in Murphy should not constitute income."