Former Solicitor General Ted Olson has an op-ed in The Washington Post arguing that a border-adjustment tax would be subject to the state apportionment requirement of the Constitution’s Direct Tax Clause. I see no prospect that a border-adjustment tax will be enacted, but if one is I think that Olson’s argument is without merit.
Let’s start with a point that is missing from the op-ed. The term “direct taxes” in the Constitution is largely a euphemism for “taxes on slaves.” Supporters of slavery in the Constitutional Convention faced a dilemma–suppose Congress were to tax slaves at a very high rate? Would that not give Congress the power (in practice) to abolish slavery? The solution was to say that direct taxes had to be apportioned among the states, which meant that even states with no slaves would have to pay a slave tax. This was a strong disincentive for such a tax, which was never enacted.
When the Supreme Court first interpreted the Direct Tax Clause in 1795, Justice Patterson (who was a member of the Convention) explained this point in his separate opinion. The import of this history is that the Court never (despite many invitations) applied the Direct Tax Clause from 1795 to 1895. (To the extent that Congress did, it was only for taxes on land.) In 1895, the Court deviated from this deferential posture and held that the income tax was a direct tax, but that was overruled by the Sixteenth Amendment. Since then, no other tax has been deemed direct.
In the face of this original understanding and overwhelming precedent, Olson musters very little in response. He simply tries to define a border-adjustment tax as direct from first principles. Maybe if given the chance he could say more (an op-ed is, after all, a very limited forum), but I doubt it.