MEMORANDUM OF LAWQuestion Presented: Would a federal net worth tax violate Article I, Section 9, Clause 4 of the United States Constitution?
Broad powers of taxation are granted to Congress by express provisions of the Constitution. Article I, Section 8, declares that "Congress shall have the power to lay and collect Taxes, Duties, Imposts, and Excises..." This broad power is limited only by the requirement of uniformity, the stipulation that direct taxes be apportioned according to population, and the prohibition against levying duties on goods exported from any state. 
Article I, Section 2 provides that "...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 .... and excluding Indians not taxed, 3/5 of all other persons." Article I, Section 9, Clause 4 reads as follows: "No Capitation or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration hereinbefore directed to be taken." This is the specific provision at issue in this memorandum.
These two provisions, when read together, set up a specific limitation upon the exercise of the power to tax: to wit, direct taxes and capitation taxes must be allocated among the states in proportion to population as determined by census.
The presence of Article I, Section 9, Clause 4 in the Constitution made the passage and subsequent ratification of the 16th Amendment in 1913 a prerequisite to the enactment of the first income tax. The 16th Amendment permits the imposition of a federal income tax without regard to apportionment among the states.  It is essential to note at this point that absent the 16th Amendment, a tax on income would be invalid as a direct tax. To see why this is so, we must first define "direct tax".
A direct tax is a tax on real or personal property imposed solely by reason of its being owned by the taxpayer. In contrast, indirect taxes are levied upon the happening of an event, such as the transmission of property. Thus defined, the income tax is plainly a direct tax. So, for that matter, is a tax on any asset.
What then of the combined federal estate and gift tax? Isn't that a tax on an estate's assets? The answer, surprisingly, is "No". Congress enacted the first federal estate tax in 1916. Its constitutionality was upheld by the United States Supreme Court in New York Trust Company v. Eisner, 1921, 256 U.S. 345. The opinion of the Court, delivered by Justice Holmes, was that the estate tax was not constitutionally infirm as a direct tax. Later cases made clear that the estate tax was not a tax on the property of the estate, but rather an excise tax on the privilege of transferring property at death. The triggering event, then, is the death of the testator. The current statute  imposes a tax on the transfer of a decedent's taxable estate.
Having concluded that Article I, Section 9, Clause 4 of the United States Constitution bars the imposition of a net worth or wealth tax by Congress, the question as to its origins remains. Why are direct taxes barred unless apportioned among the states according to population?
The origins of this provision lie first in the failure of the Articles of Confederation. One of the major weaknesses of the Continental Congress was its inadequate taxing authority. Those attending the Constitutional Convention in Philadelphia in 1787 realized that the new national government had to have ample power to raise revenues. And yet there were reservations. The main reservation of most Southerners there is reflected in the following letter from the three representatives of North Carolina (William Blount, Richard Spaight, and Hugh Williamson) to the state's governor, Governor Caswell:
We had many things to hope from a National Government and the chief thing we had to fear from such a Government was the Risque of unequal or heavy Taxation, but we hope you will believe as we do that the Southern States in general and North Carolina in particular are well secured on that head by the proposed system. It is provided in the 9th Section of Article the first that no Capitation or other direct Tax shall be laid except in proportion to the number of Inhabitants, in which number five blacks are only Counted as three. If a land tax is laid we are to pay the same rate, for Example: fifty Citizens of North Carolina can be taxed no more for all their Lands than fifty Citizens in one of the Eastern States. This must be greatly in our favour for as most of their Farms are small & many of them live in Towns we certainly have, one with another, land of twice the value that they Possess. When it is also considered that five Negroes are only to be charged the Same Poll Tax as three whites the advantage must be considerably increased under the proposed Form of Government. 
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