The subject of the income tax (the thing upon which the tax is laid) is:

The Constitution says that direct taxes (taxes on property and person) must be apportioned among the states (divided based on the last census). The income tax is not so apportioned. Therefore it must be an indirect tax (a tax on an activity or event). There is no third kind of tax, contrary to what some have claimed.

"A tax laid upon the happening of an event, as distinguished from its tangible fruits, is an indirect tax." (Tyler v. U.S., 281 U.S. 497) (1930)

"The Sixteenth Amendment expressly confirmed what had been the understanding of the Constitution before Pollock [1895]: taxes on income—including taxes on income from property— are indirect taxes that need not be apportioned." (Moore v. United States, 602 U.S. [page not yet assigned]) (2024)

So, as the Supreme Court reaffirmed in 2024, the income tax is an indirect tax laid upon an event or activity (more on the 1895 Pollock decision later). A legislative draftsman said it most clearly:

"The income tax is, therefore, not a tax on income as such. It is an excise tax [a type of indirect tax] with respect to certain activities and privileges which is measured by reference to the income which they produce. The income is not the subject of the tax; it is the basis for determining the amount of tax." (F. Morse Hubbard, Treasury Department legislative draftsman. House Congressional Record March 27th 1943, page 2580.)

So income is used to compute the tax, but it is not the subject of the tax. This turns out to be very important.

Note the use of the word 'privileges'. We will come back to it.