Background
Prior to 1895, all income taxes had been considered indirect taxes (not required to be apportioned among the states according to the population of each state). In the controversial 1895 case of Pollock v. Farmers' Loan & Trust Co., however, the Court had overturned longstanding precedent and ruled that while a tax on income from labor was an excise, or indirect tax (which was not required to be apportioned), a tax on income derived from property such as interest, dividends, or rents was or should be treated as a direct tax.
Read more about this topic: Brushaber V. Union Pacific Railroad
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