U.S. Supreme Court
CHAS.
C. STEWARD MACH. CO. v. DAVIS, 301 U.S. 548 (1937)
301 U.S. 548
CHAS.
C. STEWARD MACH. CO.
v.
DAVIS.
No. 837.
Argued April 8-9, 1937.
Decided May 24, 1937.
[301
U.S. 548, 551] Messrs. William Logan Martin, of Birmingham, Ala., Neil P.
Sterne, of Anniston, Ala., and Walter Bouldin, of
Birmingham, Ala., for petitioner.
Homer
S. Cummings, Atty. Gen.,
[301
U.S. 548, 553] Charles E. Wyzanski, Jr., Sp. Asst.
Atty. Gen., and Robert H. Jackson, Asst. Atty. Gen., for respondent.
[301
U.S. 548, 573]
Mr.
Justice CARDOZO delivered the opinion of the Court.
The
validity of the tax imposed by the Social Security Act (42 U.S.C. A. 301-1305)
on employers of eight or more is here to be determined.
Petitioner,
an Alabama corporation, paid a tax in accordance with the statute, filed a
claim for refund with the Commissioner of Internal Revenue, and sued to recover
the payment ($46.14), asserting a conflict between the statute and the Constitution
of the United States. Upon demurrer the District Court gave judgment for the
defendant dismissing the complaint, and the Circuit Court of Appeals for the
Fifth Circuit affirmed. 89 F.(2d) 207. The decision is
in accord with judgments of the Supreme Judicial Court of Massachusetts (Howes Brothers Co. v. Massachusetts Unemployment
Compensation Commission, December 30, 1936, 5 N.E.(2d)
720), the Supreme Court of California (Gillum v.
Johnson, November 25, 1936, 62 P.(2d) 1037), and the Supreme Court of Alabama (Beeland Wholesale Co. v. Kaufman, March 18, 1937, 174 So.
516). It is in conflict with a judgment of the Circuit Court of Appeals for the
First Circuit, from which one judge dissented. Davis v. Boston & Maine R.R.
Co., April 14, 1937, 89 F. ( 2d) 368. An important
question of constitutional law being involved, we granted certiorari. 300
U.S. 652 , 57 S.Ct. 673,
81 L.Ed. --. [301 U.S. 548, 574] The
Social Security Act (Act of August 14, 1935, c. 531, 49 Stat. 620, 42 U.S.C.,
c. 7 (Supp.II), 42 U.S.C.A. 301-1305) is divided into
eleven separate titles, of which only titles IX and III are so related to this
case as to stand in need of summary.
The
caption of title IX is 'Tax on Employers of Eight or More.' Every employer
(with stated exceptions) is to pay for each calendar year 'an excise tax, with
respect to having individuals in his employ,' the tax to be measured by
prescribed percentages of the total wages payable by the employer during the
calendar year with respect to such employment. Section 901,
42 U.S.C.A. 1101. One is not, however, an 'employer' within the meaning
of the act unless he employs eight persons or more. Section 907(a), 42 U.S.C.A.
1107(a). There are also other limitations of minor importance. The term
'employment' too has its special definition, excluding agricultural labor,
domestic service in a private home, and some other smaller classes. Section 907(c), 42 U.S.C.A. 1107(c). The tax begins with the
year 1936, and is payable for the first time on January 31, 1937. During the
calendar year 1936 the rate is to be 1 per cent., during 1937 2 per cent., and
3 per cent. thereafter. The proceeds, when collected,
go into the Treasury of the United States like internal revenue collections
generally. Section 905(a), 42 U.S.C.A. 1105(a). They are not earmarked in any
way. In certain circumstances, however, credits are allowable. Section 902, 42 U.S.C.A. 1102. If the taxpayer has made
contributions to an unemployment fund under a state law, he may credit such
contributions against the federal tax, provided, however, that the total credit
allowed to any taxpayer shall not exceed 90 per centum of the tax against which
it is credited, and provided also that the state law shall have been certified
to the Secretary of the Treasury by the Social Security Board as satisfying
certain minimum criteria. Section 902. The provisions
of section 903 (42 U.S.C.A. 1103) defining those criteria are stated in the [301
U.S. 548, 575] margin. 1 Some of the conditions thus
attached to the allowance of a credit are designed to give assurance that the
state unemployment compensation law shall be one in substance as well as name.
Others are designed to give assurance that the contributions shall be protected
against loss after payment to the state. To this last end there [301
U.S. 548, 576] are provisions that before a state law shall have the
approval of the Board it must direct that the contributions to the state fund
be paid over immediately to the Secretary of the Treasury to the credit of the
'Unemployment Trust Fund.' Section 904 (42 U.S.C.A. 1104) establishing this
fund is quoted below. 2 For the moment it is enough to say that
the fund is to be held by the Secretary of the Treasury, who is to invest in
government securities any portion not required in his judgment to meet current
withdrawals. He is authorized and directed to pay out of the fund to any
competent state agency such sums as it may duly requisition from the amount
standing to its credit. Section 904(f), 42 U.S.C.A. 1104(f).
[301 U.S. 548, 577] Title III, which is
also challenged as invalid, has the caption 'Grants to States for Unemployment
Compensation Administration.' Under this title, certain sums of money are
'authorized to be appropriated' for the purpose of assisting the states in the
administration of their unemployment compensation laws, the maximum for the
fiscal year ending June 30, 1936, to be $4,000,000, and $49,000,000 for each fiscal
year thereafter. Section 301, 42 U.S.C.A. 501. No
present appropriation is made to the extent of a single dollar. All that the
title does is to authorize future appropriations. Actually only $2,250,000 of
the $4,000, 000 authorized was appropriated for 1936 (Act of Feb. 11, [301
U.S. 548, 578] 1936, c. 49, 49 Stat. 1109, 1113) and only $29,000,000 of the
$49,000,000 authorized for the following year (Act of June 22, 1936, c. 689, 49
Stat. 1597, 1605). The appropriations when made were not specifically out of
the proceeds of the employment tax, but out of any moneys in the Treasury.
Other sections of the title prescribe the method by which the payments are to
be made to the state (section 302, 42 U.S.C.A. 502) and also certain conditions
to be established to the satisfaction of the Social Security Board before
certifying the propriety of a payment to the Secretary of the Treasury (section
303, 42 U.S.C.A. 503). They are designed to give assurance to the federal
government that the moneys granted by it will not be expended for purposes
alien to the grant, and will be used in the administration of genuine
unemployment compensation laws.
The
assault on the statute proceeds on an extended front. Its assailants take the
ground that the tax is not an excise; that it is not uniform throughout the
United States as excises are required to be; that its exceptions are so many
and arbitrary as to violate the Fifth Amendment; that its purpose was not
revenue, but an unlawful invasion of the reserved powers of the states; and
that the states in submitting to it have yielded to coercion and have abandoned
governmental functions which they are not permitted to surrender.
The
objections will be considered seriatim with such further explanation as may be
necessary to make their meaning clear.
First:
The tax, which is described in the statute as an excise, is laid with
uniformity throughout the United States as a duty, an impost, or an excise upon
the relation of employment.
1.
We are told that the relation of employment is one so
essential to the pursuit of happiness that it may not be burdened with a tax.
Appeal is made to history. From the precedents of colonial days, we are
supplied with [301 U.S. 548, 579] illustrations of
excises common in the colonies. They are said to have been bound up with the
enjoyment of particular commodities. Appeal is also made to principle or the
analysis of concepts. An excise, we are told, imports a tax upon a privilege;
employment, it is said, is a right, not a privilege, from which it follows that
employment is not subject to an excise. Neither the one appeal nor the other
leads to the desired goal.
As
to the argument from history: Doubtless there were many excises in colonial
days and later that were associated, more or less intimately, with the
enjoyment or the use of property. This would not prove, even if no others were
then known, that the forms then accepted were not subject to enlargement. Cf.
Pensacola Teleg. Co. v. Western Union Telegraph Co., 96 U.S. 1 ,
9; In re Debs, 158
U.S. 564, 591 , 15 S.Ct. 900; South Carolina v.
United States, 199
U.S. 437, 448 , 449 S., 26 S.Ct. 110, 4 Ann.Cas. 737. But in truth other excises were known, and
known since early times. Thus in 1695 (6 & 7 Wm. III, c. 6), Parliament
passed an act which granted 'to His Majesty certain Rates and Duties upon
Marriages, Births and Burials,' all for the purpose of 'carrying on the War
against France with Vigour.' See Opinion of the
Justices, 196 Mass. 603, 609, 85 N.E. 545, 547. No commodity was affected
there. The industry of counsel has supplied us with an apter
illustration where the tax was not different in substance from the one now
challenged as invalid. In 1777, before our Constitutional Convention,
Parliament laid upon employers an annual 'duty' of 21 shillings for 'every male
Servant' employed in stated forms of work. 3 [301
U.S. 548, 580] Revenue Act of 1777, 17 George III, c. 39.4 The point is made
as a distinction that a tax upon the use of male servants was thought of as a
tax upon a luxury. Davis v. Boston & Maine R.R. Co., supra.
It did not touch employments in husbandry or business. This is to throw over
the argument that historically an excise is a tax upon the enjoyment of
commodities. But the attempted distinction, whatever may be thought of its
validity, is inapplicable to a statute of Virginia passed in 1780. There a tax
of 3 pounds, 6 shillings, and 8 pence was to be paid for every male tithable above the age of twenty-one years (with stated
exceptions), and a like tax for 'every white servant whatsoever, except apprentices
under the age of twenty one years.' 10 Hening's
Statutes of Virginia, p. 244. Our colonial forbears knew more about ways of
taxing than some of their descendants seem to be willing to concede. 5
The
historical prop failing, the prop or fancied prop of principle remains. We
learn that employment for lawful gain is a 'natural' or 'inherent' or
'inalienable' right, and not a 'privilege' at all. But
natural rights, so called, are as much subject to taxation as rights of less
importance. 6 An excise is not limited to vocations or
activities [301 U.S. 548, 581] that may be prohibited
altogether. It is not limited to those that are the outcome of a franchise. It
extends to vocations or activities pursued as of common right. What the
individual does in the operation of a business is amenable to taxation just as
much as what he owns, at all events if the classification is not tyrannical or
arbitrary. 'Business is as legitimate an object of the taxing power as
property.' City of Newton v. Atchison, 31 Kan. 151, 154, 1 P. 288, 290, 47 Am.Rep. 486
(per Brewer, J.). Indeed, ownership itself, as we had occasion to point
out the other day, is only a bundle of rights and privileges invested with a
single name. Henneford v. Silas Mason Co., Inc.
(March 29, 1937) 300
U.S. 577 , 57 S.Ct. 524,
527. 'A state is at liberty, if it pleases, to tax them all collectively, or to
separate the faggots and lay the charge distributively.'
Id. Employment is a business relation, if not itself a business. It is a
relation without which business could seldom be carried on effectively. The
power to tax the activities and relations that constitute a calling considered
as a unit is the power to tax any of them. The whole includes the parts.
Nashville, C. & St. L. Ry. Co. v. Wallace, 288
U.S. 249, 267 , 268 S., 53 S.Ct.
345, 349, 350, 87 A.L.R. 1191
The
subject-matter of taxation open to the power of the Congress is as
comprehensive as that open to the power of the states, though the method of
apportionment may at times be different. 'The Congress shall have Power to lay
and collect Taxes, Duties, Imposts and Excises.' Article 1,
8. If the tax is a direct one, it shall be apportioned according to the
census or enumeration. If it is a duty, impost, or excise, it shall be uniform
throughout the United States. Together, these classes include every form of tax
appropriate to sovereignty. Cf. Burnet v. Brooks, 288
U.S. 378, 403 , 405 S., 53 S.Ct. 457, 464, 465,
86 A.L.R. 747; Brushaber v. Union Pacific R.R. Co., 240 U.S.
1, 12 , 36 S.Ct. 236, L.R.A.1917D, 414,
Ann.Cas.1917B, 713. Whether the tax is to be [301 U.S. 548, 582] classified
as an 'excise' is in truth not of critical importance. If not that, it is an
'impost' (Pollock v. Farmers' Loan & Trust Co., 158
U.S. 601, 622 , 625 S., 15 S.Ct. 912; Pacific
Insurance Co. v. Soule, 7 Wall. 433, 445), or a 'duty' (Veazie
Bank v. Fenno, 8 Wall. 533, 546, 547; Pollock v.
Farmers' Loan & Trust Co., 157
U.S. 429, 570 , 15 S.Ct. 673; Knowlton v. Moore, 178 U.S.
41, 46 , 20 S.Ct. 747). A capitation or other
'direct' tax it certainly is not. 'Although there have been, from time to time,
intimations that there might be some tax which was not a direct tax, nor
included under the words 'duties, imposts, and excises,' such a tax, for more
than 100 years of national existence, has as yet remained undiscovered,
notwithstanding the stress of particular circumstances has invited thorough
investigation into sources of revenue.' Pollock v. Farmers' Loan & Trust
Co., 157
U.S. 429, 557 , 15 S.Ct.
673, 680. There is no departure from that thought in later cases, but rather a
new emphasis of it. Thus, in Thomas v. United States, 192
U.S. 363, 370 , 24 S.Ct. 305, 306, it was said of
the words 'duties, imposts, and excises' that 'they were used comprehensively
to cover customs and excise duties imposed on importation, consumption,
manufacture, and sale of certain commodities, privileges, particular business
transactions, vocations, occupations, and the like.' At times taxpayers have
contended that the Congress is without power to lay an excise on the enjoyment
of a privilege created by state law. The contention has been put aside as
baseless. Congress may tax the transmission of property by inheritance or will,
though the states and not Congress have created the privilege of succession.
Knowlton v. Moore, supra, 178 U.S.
41 , at page 58, 20 S.Ct.
747. Congress may tax the enjoyment of a corporate franchise, though a state
and not Congress has brought the franchise into being. Flint v. Stone Tracy
Co., 220
U.S. 107, 108 , 155 S., 31 S.Ct.
342, Ann.Cas.1912B, 1312. The statute books of the states are strewn with
illustrations of taxes laid on [301 U.S. 548, 583] occupations
pursued of common right. 7 We find no basis for a holding that
the power in that regard which belongs by accepted
practice to the Legislatures of the states, has been denied by the Constitution
to the Congress of the nation.
2.
The tax being an excise, its imposition must conform to the
canon of uniformity. There has been no departure from this requirement.
According to the settled doctrine, the uniformity exacted is geographical, not
intrinsic. Knowlton v. Moore, supra, 178 U.S.
41 , at page 83, 20 S.Ct. 747; Flint v. Stone
Tracy Co., supra, 220
U.S. 107 , at page 158, 31 S.Ct. 342,
Ann.Cas.1912B, 1312; Billings v. United States, 232
U.S. 261, 282 , 34 S.Ct. 421; Stellwagen
v. Clum, 245
U.S. 605, 613 , 38 S.Ct. 215; LaBelle
Iron Works v. United States, 256
U.S. 377, 392 , 41 S.Ct. 528, 532; Poe v. Seaborn, 282
U.S. 101, 117 , 51 S.Ct. 58, 61; Wright v. Vinton
Branch of Mountain Trust Bank (March 29, 1937) 300
U.S. 440 , 57 S. Ct. 556. 'The rule of liability shall be alike in all
parts of the United States.' Florida v. Mellon, 273 U.S.
12, 17 , 47 S.Ct. 265,
266.
Second:
The excise is not invalid under the provisions of the Fifth Amendment by force
of its exemptions. [301 U.S. 548, 584] The statute does not
apply, as we have seen, to employers of less then eight. It does not apply to
agricultural labor, or domestic service in a private home or to some other
classes of less importance. Petitioner contends that the effect of these
restrictions is an arbitrary discrimination vitiating the tax.
The
Fifth Amendment unlike the Fourteenth has no equal protection clause. LaBelle Iron Works v. United States, supra; Brushaber v. Union Pacific R.R. Co., supra, 240 U.S. 1 , at page 24, 36 S.Ct. 236,
L.R.A.1917D, 414, Ann.Cas.1917B, 713. But even the states, though subject to
such a clause, are not confined to a formula of rigid uniformity in framing
measures of taxation. Swiss Oil Corporation v. Shanks, 273
U.S. 407, 413 , 47 S.Ct.
393, 395. They may tax some kinds of property at one rate, and others at
another, and exempt others altogether. Bell's Gap R.R. Co. v. Pennsylvania, 134
U.S. 232 , 10 S. Ct. 533; Stebbins v. Riley, 268
U.S. 137, 142 , 45 S.Ct. 424, 426, 44 A.L.R.
1454; Ohio Oil Co. v. Conway, 281
U.S. 146, 150 , 50 S.Ct. 310. They may lay an
excise on the operations of a particular kind of business, and exempt some
other kind of business closely akin thereto. Quong
Wing v. Kirkendall, 223 U.S.
59, 62 , 32 S.Ct. 192; American Sugar Refining
Co. v. Louisiana, 179 U.S.
89, 94 , 21 S.Ct. 43; Armour
Packing Co. v. Lacy, 200
U.S. 226, 235 , 26 S.Ct. 232; Brown-Forman Co. v.
Kentucky, 217
U.S. 563, 573 , 30 S.Ct. 578; Heisler
v. Thomas Colliery Co., 260
U.S. 245, 255 , 43 S.Ct. 83, 84; State Board of
Tax Com'rs v. Jackson, 283
U.S. 527, 537 , 538 S., 51 S.Ct. 540, 543, 73
A.L. R. 1464, 75 A.L.R. 1536. If this latitude of judgment is lawful for the
states, it is lawful, a fortiori, in legislation by the Congress, which is
subject to restraints less narrow and confining. Quong Wing v. Kirkendall,
supra.
The
classifications and exemptions directed by the statute now in controversy have
support in considerations of policy and practical convenience that cannot be
condemned as arbitrary. The classifications and exemptions would therefore be
upheld if they had been adopted by a state and the provisions of the Fourteenth
Amendment were invoked to annul them. This is held in two cases [301
U.S. 548, 585] passed upon today in which precisely the same provisions were
the subject of attack, the provisions being contained in the Unemployment
Compensation Law of the state of Alabama (Gen.Acts
Ala.1935, p. 950, as amended). Carmichael v. Southern Coal & Coke Co.
(Carmichael v. Gulf States Paper Corporation), 301
U.S. 495 , 57 S.Ct. 868,
81 L.Ed. --. The opinion rendered in those cases
covers the ground fully. It would be useless to repeat the argument. The act of
Congress is therefore valid, so far at least as its system of exemptions is
concerned, and this though we assume that discrimination, if gross enough, is
equivalent to confiscation and subject under the Fifth Amendment to challenge
and annulment.
Third:
The excise is not void as involving the coercion of the states in contravention
of the Tenth Amendment or of restrictions implicit in our federal form of
government.
The
proceeds of the excise when collected are paid into the Treasury at Washington,
and thereafter are subject to appropriation like public moneys generally.
Cincinnati Soap Co. v. United States (May 3, 1937) 301
U.S. 308 , 57 S.Ct. 764,
81 L.Ed. --. No presumption can be indulged that they
will be misapplied or wasted. 8 Even if they were collected in
the hope or expectation that some other and collateral good would be furthered
as an incident, that without more would not make the act invalid. Sonzinsky v. United States (March 29, 1937) 300
U.S. 506 , 57 S.Ct. 554,
555. This indeed is hardly questioned. The case for the petitioner is built on
the contention that here an ulterior aim is wrought into the very structure of
the act, and what is [301 U.S. 548, 586] even more important
that the aim is not only ulterior, but essentially unlawful. In
particular, the 90 per cent. credit is relied
upon as supporting that conclusion. But before the statute succumbs to an
assault upon these lines, two propositions must be made out by the assailant. Cincinnati Soap Co. v. United States, supra. There must be a
showing in the first place that separated from the credit the revenue
provisions are incapable of standing by themselves. There must be a showing in
the second place that the tax and the credit in combination are weapons of
coercion, destroying or impairing the autonomy of the states. The truth of each
proposition being essential to the success of the assault, we pass for
convenience to a consideration of the second, without pausing to inquire
whether there has been a demonstration of the first.
To
draw the line intelligently between duress and inducement, there is need to
remind ourselves of facts as to the problem of unemployment that are now matters of common knowledge. West Coast Hotel Co. v.
Parrish ( March 29, 1937) 300
U.S. 379 , 57 S.Ct. 578. The relevant statistics
are gathered in the brief of counsel for the government. Of the many available
figures a few only will be mentioned. During the years 1929 to 1936, when the
country was passing through a cyclical depression, the number of the unemployed
mounted to unprecedented heights. Often the average was more than 10 million;
at times a peak was attained of 16 million or more. Disaster to the breadwinner
meant disaster to dependents. Accordingly the roll of the unemployed, itself
formidable enough, was only a partial roll of the destitute or needy. The fact
developed quickly that the states were unable to give the requisite relief. The
problem had become national in area and dimensions. There was need of help from
the nation if the people were not to starve. It is too late today for the
argument to be heard with tolerance that in a crisis so extreme the use of the
moneys of the nation to relieve the unemployed [301 U.S. 548, 587] and
their dependents is a use for any purpose narrower than the promotion of the
general welfare. Cf. United States v. Butler, 297 U.S.
1, 65 , 66 S., 56 S.Ct.
312, 319, 102 A.L.R. 914; Helvering v. Davis, 301
U.S. 619, 672 , 57 S.Ct. 904, 81 L.Ed. --, decided herewith. The nation responded to the
call of the distressed. Between January 1, 1933, and July 1, 1936, the states
(according to statistics submitted by the government) incurred obligations of
$689,291,802 for emergency relief; local subdivisions an additional
$775,675,366. In the same period the obligations for emergency relief incurred
by the national government were $ 2,929,307,125, or twice the obligations of
states and local agencies combined. According to the President's budget message
for the fiscal year 1938, the national government expended for public works and
unemployment relief for the three fiscal years 1934, 1935, and 1936, the
stupendous total of $8,681,000,000. The parens patriae has many reasons-fiscal and economic as well as
social and moral-for planning to mitigate disasters that bring these burdens in
their train.
In
the presence of this urgent need for some remedial expedient, the question is
to be answered whether the expedient adopted has overlept
the bounds of power. The assailants of the statute say that its dominant end
and aim is to drive the state Legislatures under the whip of economic pressure
into the enactment of unemployment compensation laws at the bidding of the
central government. Supporters of the statute say that its operation is not
constraint, but the creation of a larger freedom, the states and the nation
joining in a co-operative endeavor to avert a common evil. Before Congress
acted, unemployment compensation insurance was still, for the most part, a
project and no more. Wisconsin was the pioneer. Her statute was adopted in
1931. At times bills for such insurance were introduced elsewhere, but they did
not reach the stage of law. In 1935, four states (California, Massachusetts,
New Hampshire, and New York) passed unem- [301
U.S. 548, 588] ployment
laws on the eve of the adoption of the Social Security Act, and two others did
likewise after the federal act and later in the year. The statutes differed to
some extent in type, but were directed to a common end. In 1936, twenty-eight
other states fell in line, and eight more the present
year. But if states had been holding back before the passage of the federal
law, inaction was not owing, for the most part, to the
lack of sympathetic interest. Many held back through alarm lest in laying such
a toll upon their industries, they would place themselves in a position of
economic disadvantage as compared with neighbors or competitors. See House
Report, No. 615, 74th Congress, 1st session, p. 8; Senate Report, No. 628, 74th
Congress, 1st session, p. 11.9 Two consequences ensued. One was that the
freedom of a state to contribute its fair share to the solution of a national
problem was paralyzed by fear. The other was that in so far as there was
failure by the states to contribute relief according to the measure of their
capacity, a disproportionate burden, and a mountainous one, was laid upon the
resources of the government of the nation.
The
Social Security Act is an attempt to find a method by which all these public
agencies may work together to a common end. Every dollar of the new taxes will
continue in all likelihood to be used and needed by the [301
U.S. 548, 589] nation as long as states are unwilling, whether through
timidity or for other motives, to do what can be done at home. At least the
inference is permissible that Congress so believed, though retaining
undiminished freedom to spend the money as it pleased. On the other hand,
fulfillment of the home duty will be lightened and encouraged by crediting the
taxpayer upon his account with the Treasury of the nation to the extent that
his contributions under the laws of the locality have simplified or diminished
the problem of relief and the probable demand upon the resources of the fisc. Duplicated taxes, or burdens that approach them are
recognized hardships that government, state or national, may properly avoid. Henneford v. Silas Mason Co., Inc., supra; Kidd v. Alabama,
188
U.S. 730, 732 , 23 S.Ct. 401; Watson v. State
Comptroller, 254
U.S. 122, 125 , 41 S.Ct. 43, 44. If Congress
believed that the general welfare would better be promoted by relief through
local units than by the system then in vogue, the co-operating localities ought
not in all fairness to pay a second time.
Who
then is coerced through the operation of this statute? Not the taxpayer. He
pays in fulfillment of the mandate of the local legislature. Not the state.
Even now she does not offer a suggestion that in passing the unemployment law
she was affected by duress. See Carmichael v. Southern Coal & Coke Co.
(Carmichael v. Gulf States Paper Corporation), supra. For all that appears, she
is satisfied with her choice, and would be sorely disappointed if it were now
to be annulled. The difficulty with the petitioner's contention is that it
confuses motive with coercion. 'Every tax is in some measure regulatory. To
some extent it interposes an economic impediment to the activity taxed as
compared with others not taxed.' Sonzinsky v. United States, supra. In like manner every rebate from a
tax when conditioned upon conduct is in some measure a temptation. But to hold
that motive [301 U.S. 548, 590] or temptation is
equivalent to coercion is to plunge the law in endless difficulties. The
outcome of such a doctrine is the acceptance of a philosophical determinism by
which choice becomes impossible. Till now the law has been guided by a robust
common sense which assumes the freedom of the will as a working hypothesis in
the solution of its problems. The wisdom of the hypothesis has illustration in
this case. Nothing in the case suggests the exertion of a power akin to undue
influence, if we assume that such a concept can ever be applied with fitness to
the relations between state and nation. Even on that assumption the location of
the point at which pressure turns into compulsion, and ceases to be inducement,
would be a question of degree, at times, perhaps, of fact. The point had not
been reached when Alabama made her choice. We cannot say that she was acting,
not of her unfettered will, but under the strain of a persuasion equivalent to
undue influence, when she chose to have relief administered under laws of her
own making, by agents of her own selection, instead of under federal laws,
administered by federal officers, with all the ensuing evils, at least to many
minds, of federal patronage and power. There would be a strange irony, indeed,
if her choice were now to be annulled on the basis of an assumed duress in the
enactment of a statute which her courts have accepted as a true expression of
her will. Beeland Wholesale Co. v. Kaufman, supra. We think the choice must
stand.
In
ruling as we do, we leave many questions open. We do not say that a tax is
valid, when imposed by act of Congress, if it is laid upon the condition that a
state may escape its operation through the adoption of a statute unrelated in
subject-matter to activities fairly within the scope of national policy and
power. No such question is before us. In the tender of this credit Congress
does not intrude upon fields foreign to its function. The purpose [301
U.S. 548, 591] of its intervention, as we have shown, is to safeguard its
own treasury and as an incident to that protection to place the states upon a
footing of equal opportunity. Drains upon its own resources are to be checked;
obstructions to the freedom of the states are to be leveled. It is one thing to
impose a tax dependent upon the conduct of the taxpayers, or of the state in
which they live, where the conduct to be stimulated or discouraged is unrelated
to the fiscal need subserved by the tax in its normal
operation, or to any other end legitimately national. The Child Labor Tax Case,
259
U.S. 20 , 42 S.Ct. 449,
21 A.L.R. 1432, and Hill v. Wallace, 259 U.S.
44 , 42 S.Ct. 453, were decided in the belief
that the statutes there condemned were exposed to that reproach. Cf. United
States v. Constantine, 296
U.S. 287 , 56 S.Ct. 223.
It is quite another thing to say that a tax will be abated upon the doing of an
act that will satisfy the fiscal need, the tax and the alternative being approximate
equivalents. In such circumstances, if in no others, inducement or persuasion
does not go beyond the bounds of power. We do not fix the outermost line. Enough for present purposes that wherever the line may be, this
statute is within it. Definition more precise must abide the wisdom of
the future.
Florida
v. Mellon, 273
U.S. 12 , 47 S.Ct. 265,
supplies us with a precedent, if precedent be needed. What was in controversy
there was section 301 of the Revenue Act of 1926 (44 Stat. 69), which imposes a
tax upon the transfer of a decedent's estate, while at the same time permitting
a credit, not exceeding 80 per cent., for 'the amount of any estate,
inheritance, legacy, or succession taxes actually paid to any State or
Territory.' Florida challenged that provision as unlawful. Florida had no
inheritance taxes and alleged that under its constitution it could not levy
any. 273
U.S. 12, 15 , 47 S.Ct.
265. Indeed, by abolishing inheritance taxes, it had hoped to induce wealthy
persons to become its citizens. See 67 Cong. Rec., Part 1, pp. 735, 752. It
argued at our bar that 'the Estate Tax provision was not passed for the purpose
[301 U.S. 548, 592] of raising federal
revenue' ( 273 U.S.
12, 14 , 47 S.Ct. 265), but rather 'to coerce
States into adopting estate or inheritance tax laws' ( 273 U.S.
12, 13 , 47 S.Ct. 265). In
fact, as a result of the 80 per cent. credit,
material changes of such laws were made in thirty-six states. 10 In
the face of that attack we upheld the act as valid. Cf. Massachusetts v.
Mellon, 262
U.S. 447, 482 , 43 S.Ct.
597, 599; also Act of August 5, 1861, c. 45, 12 Stat. 292; Act of May 13, 1862,
c. 66, 12 Stat. 384.
United
States v. Butler, supra, is cited by petitioner as a decision to the contrary.
There a tax was imposed on processors of farm products, the proceeds to be paid
to farmers who would reduce their acreage and crops under agreements with the
Secretary of Agriculture, the plan of the act being to increase the prices of
certain farm products by decreasing the quantities produced. The court held (1)
that the socalled tax was not a true one ( 297 U.S.
1 , at pages 56, 61, 56 S.Ct. 312, 315, 317, 102
A.L.R. 914), the proceeds being earmarked for the benefit of farmers complying
with the prescribed conditions, (2) that there was an attempt to regulate
production without the consent of the state in which production was affected,
and (3) that the payments to farmers were coupled with coercive contracts ( 297 U.S.
1 , at page 73, 56 S.Ct. 312, 322, 102 A.L.R.
914), unlawful in their aim and oppressive in their consequences. The decision
was by a a divided court, a
minority taking the view that the objections were untenable. None of them is
applicable to the situation here developed.
(a) The proceeds of the tax
in controversy are not earmarked for a special group.
(b) The unemployment
compensation law which is a condition of the credit has had the approval of the
state and could not be a law without it.
(c) The condition is not
linked to an irrevocable agreement, for the state at its pleasure may repeal
its unemployment law (section 903(a)(6), 42 U.S.C.A.
1103(a)(6), terminate the credit, [301 U.S. 548, 593] and
place itself where it was before the credit was accepted.
(d) The condition is not
directed to the attainment of an unlawful end, but to an end, the relief of
unemployment, for which nation and state may lawfully coo perate.
Fourth:
The statute does not call for a surrender by the
states of powers essential to their quasi sovereign existence.
Argument
to the contrary has its source in two sections of the act. One section (90311)
defines the minimum criteria to which a state compensation system is required
to conform if it is to be accepted by the Board as the basis for a credit. The other section (90412) rounds out the requirement with
complementary rights and duties. Not all the criteria or their incidents
are challenged as unlawful. We will speak of them first generally, and then
more specifically in so far as they are questioned.
A
credit to taxpayers for payments made to a state under a state unemployment law
will be manifestly futile in the absence of some assurance that the law leading
to the credit is in truth what it professes to be. An unemployment law framed
in such a way that the unemployed who look to it will be deprived of reasonable
protection is one in name and nothing more. What is basic and essential may be
assured by suitable conditions. The terms embodied in these sections are
directed to that end. A wide range of judgment is given to the several states
as to the particular type of statute to be spread upon their books. For
anything to the contrary in the provisions of this act they may use the pooled
unemployment form, which is in effect with variations in Alabama, California,
Michigan, New York, and elsewhere. They may establish a system of merit ratings
applicable at [301 U.S. 548, 594] once or to go into
effect later on the basis of subsequent experience. Cf. Sections 909, 910, 42
U.S.C.A. 1109, 1110. They may provide for employee contributions as in Alabama
and California, or put the entire burden upon the employer as in New York. They
may choose a system of unemployment reserve accounts by which an employer is
permitted after his reserve has accumulated to contribute at a reduced rate or even
not at all. This is the system which had its origin in Wisconsin. What they may
not do, if they would earn the credit, is to depart from those standards which
in the judgment of Congress are to be ranked as fundamental. Even if opinion
may differ as to the fundamental quality of one or more of the conditions, the
difference will not avail to vitiate the statute. In determining essentials,
Congress must have the benefit of a fair margin of discretion. One cannot say
with reason that this margin has been exceeded, or that the basic standards
have been determined in any arbitrary fashion. In the event that some
particular condition shall be found to be too uncertain to be capable of
enforcement, it may be severed from the others, and what is left will still be
valid.
We
are to keep in mind steadily that the conditions to be approved by the Board as
the basis for a credit are not provisions of a contract, but terms of a
statute, which may be altered or repealed. Section 903(a)(6).
The state does not bind itself to keep the law in force. It does not even bind
itself that the moneys paid into the federal fund will be kept there
indefinitely or for any stated time. On the contrary, the Secretary of the
Treasury will honor a requisition for the whole or any part of the deposit in
the fund whenever one is made by the appropriate officials. The only
consequence of the repeal or excessive amendment of the statute, or the
expenditure of the money, when requisitioned, for other than compensation uses
or administrative expenses, is [301 U.S. 548, 595] that
approval of the law will end, and with it the allowance of a credit, upon
notice to the state agency and an opportunity for hearing. Section
903(b, c), 42 U.S.C.A. 1103(b, c).
These
basic considerations are in truth a solvent of the problem. Subjected to their
test, the several objections on the score of abdication are found to be unreal.
Thus,
the argument is made that by force of an agreement the moneys when withdrawn
must be 'paid through public employment offices in the State or such other
agencies as the Board may approve.' Section 903(a)(1),
42 U.S.C.A. 1103(a)(1). But in truth there is no agreement as to the method of
disbursement. There is only a condition which the state is free at pleasure to
disregard or to fulfill. Moreover, approval is not requisite if public
employment offices are made the disbursing instruments. Approval is to be a
check upon resort to 'other agencies' that may perchance, be irresponsible. A
state looking for a credit must give assurance that her system has been
organized upon a base of rationality.
There
is argument again that the moneys when withdrawn are to be devoted to specific
uses, the relief of unemployment, and that by agreement for such payment the
quasi-sovereign position of the state has been impaired, if not abandoned. But
again there is confusion between promise and condition. Alabama is still free,
without breach of an agreement to change her system over night. No officer or
agency of the national government can force a compensation law upon her or keep
it in existence. No officer or agency of that government, either by suit or
other means, can supervise or control the application of the payments.
Finally
and chiefly, abdication is supposed to follow from section 904 of the statute
and the parts of section 903 that are complementary thereto. Section 903(a)(3). By these the Secretary of the Treasury is authorized
and directed to receive and hold in the Unemployment Trust Fund all [301
U.S. 548, 596] moneys deposited therein by a state agency for a state
unemployment fund and to invest in obligations of the United States such
portion of the fund as is not in his judgment required to meet current
withdrawals. We are told that Alabama in consenting to that deposit has
renounced the plenitude of power inherent in her statehood.
The
same pervasive misconception is in evidence again. All that the state has done
is to say in effect through the enactment of a statute that her agents shall be
authorized to deposit the unemployment tax receipts in the Treasury at
Washington. Alabama Unemployment Act of September 14, 1935, section 10(i) (Gen.Acts Ala.1935, p. 961).
The statute may be repealed. Section 903(a)(6), 42
U.S.C.A. 1103(a)(6). The consent may be revoked. The deposits may be withdrawn.
The moment the state commission gives notice to the depositary that it would
like the moneys back, the Treasurer will return them. To find state destruction
there is to find it almost anywhere. With nearly as much reason one might say
that a state abdicates its functions when it places the state moneys on deposit
in a national bank.
There
are very good reasons of fiscal and governmental policy why a state should be
willing to make the Secretary of the Treasury the custodian of the fund. His
possession of the moneys and his control of investments will be an assurance of
stability and safety in times of stress and strain. A report of the Ways and
Means Committee of the House of Representatives, quoted in the margin, develops
the situation clearly. 13 Nor is there risk of loss [301
U.S. 548, 597] or waste. The credit of the Treasury is at all times back of
the deposit, with the result that the right of withdrawal will be unaffected by
the fate of any intermediate investments, just as if a checking account in the
usual form had been opened in a bank.
The
inference of abdication thus dissolves in thinnest air when the deposit is
conceived of as dependent upon a statutory consent, and not upon a contract
effective to create a duty. By this we do not intimate that the conclusion
would be different if a contract were discovered. Even sovereigns may contract
without derogating from their sovereignty. Perry v. United States, 294
U.S. 330, 353 , 55 S.Ct.
432, 436, 95 A.L.R. 1335; 1 Oppenheim, International Law (4th Ed.) 493, 494;
Hall, International Law (8th Ed.) 107; 2 Hyde, International Law, 489. The
states are at liberty, upon obtaining the consent of Congress, to make
agreements with one another. Constitution, art. 1, 10, par. 3. Poole v. Fleeger, 11 Pet. 185, 209; Rhode Island v. Massachusetts,
12 Pet. 657, 725. We find no room for doubt that they may do the like
with Congress if the essence of their statehood is maintained without
impairment. 14 Alabama
[301 U.S. 548, 598] is seeking and obtaining a
credit of many millions in favor of her citizens out of the Treasury of the
nation. Nowhere in our scheme of government-in the limitations express or
implied of our Federal Constitution-do we find that she is prohibited from
assenting to conditions that will assure a fair and just requital for benefits
received. But we will not labor the point further. An unreal prohibition
directed to an unreal agreement will not vitiate an act of Congress, and cause
it to collapse in ruin.
Fifth:
Title III of the act is separable from title IX, and its validity is not at
issue.
The
essential provisions of that title have been stated in the opinion. As already
pointed out, the title does not appropriate a dollar of the public moneys. It
does no more than authorize appropriations to be made in the future for the
purpose of assisting states in the administration of their laws, if Congress
shall decide that appropriations are desirable. The title might be expunged,
and title IX would stand intact. Without a severability clause we should still
be led to that conclusion. The presence of such a clause (section 1103, 42
U.S.C.A. 1303) makes the conclusion even clearer. Williams v. Standard Oil Co.,
278
U.S. 235, 242 , 49 S.Ct. 115, 117, 60 A.L.R. 596;
Utah Power & Light Co. v. Pfost, 286
U.S. 165, 184 , 52 S.Ct. 548, 553; Carter v.
Carter Coal Co., 298
U.S. 238, 312 , 56 S.Ct. 855, 873.
The
judgment is affirmed.
Separate
opinion of Mr. Justice McREYNOLDS.
That
portion of the Social Security legislation here under consideration, I think,
exceeds the power granted to Congress. It unduly interferes with the orderly
government of the state by her own people and otherwise offends the Federal
Constitution.
In Texas v. White (1869) 7 Wall.
700, 725, a cause of momentous importance, this Court, through Chief Justice
Chase, declared- [301 U.S. 548, 599] 'But the perpetuity and
indissolubility of the Union, by no means implies the loss of distinct and
individual existence, or of the right of self-government by the States. Under
the Articles of Confederation each State retained its sovereignty, freedom, and
independence, and every power, jurisdiction, and right not expressly delegated
to the United States. Under the Constitution, though the powers of the States
were much restricted, still, all powers not delegated to the United States, nor
prohibited to the States, are reserved to the States respectively, or to the
people. And we have already had occasion to remark at this term, that 'the
people of each State compose a State, having its own government, and endowed
with all the functions essential to separate and independent existence,' and
that 'without the States in union, there could be no such political body as the
United States.' (Lane County v. Oregon, 7 Wall. 71, 76).
Not only, therefore, can there be no loss of separate and independent autonomy
to the States, through their union under the Constitution, but it may be not
unreasonably said that the preservation of the States, and the maintenance of
their governments, are as much within the design and care of the Constitution
as the preservation of the Union and the maintenance of the National
Government. The Constitution, in all its provisions, looks to an indestructible
Union, composed of indestructible States.'
The
doctrine thus announced and often repeated, I had supposed was firmly
established. Apparently the states remained really free to exercise governmental
powers, not delegated or prohibited, without interference by the federal
government through threats of punitive measures or offers of seductive favors.
Unfortunately, the decision just announced opens the way for practical
annihilation of this theory; and no cloud of words or ostentatious parade of
irrelevant statistics should be permitted to obscure that fact. [301
U.S. 548, 600] The invalidity also the destructive tendency of legislation
like the act before us were forecefully pointed out
by President Franklin Pierce in a veto message sent to the Senate May 3, 1854.1
He was a scholarly lawyer of distinction and enjoyed the advice and counsel of
a rarely able Attorney General-Caleb Cushing of Massachusetts. This message
considers with unusual lucidity points here specially
important. I venture to set out pertinent portions of it which must appeal to
all who continue to respect both the letter and spirit of our great charter.
'To
the Senate of the United States:
'The
bill entitled 'An Act making a grant of public lands to the several States for
the benefit of indigent insane persons,' which was presented to me on the 27th
ultimo, has been maturely considered, and is returned to the Senate, the House
in which it originated, with a statement of the objections which have required
me to withhold from it may approval . ...
'If
in presenting my objections to this bill I should say more than strictly
belongs to the measure or is required for the discharge of my official
obligation, let it be attributed to a sincere desire to justify my act before
those whose good opinion I so highly value and to that earnestness which
springs from my deliberate conviction that a strict adherence to the terms and
purposes of the federal compact offers the best, if not the only, security for
the preservation of our blessed inheritance of representative liberty.
'The
bill provides in substance:
'First.
That 10,000,000 acres of land be granted to the
several States, to be apportioned among them in the compound ratio of the
geographical area and representation of said States in the House of
Representatives. [301 U.S. 548, 601] 'Second. That wherever
there are public lands in a State subject to sale at the reguiar
price of private entry, the proportion of said 10,000, 000 acres falling to
such State shall be selected from such lands within it, and that to the States
in which there are no such public lands land scrip shall be issued to the
amount of their distributive shares, respectively, said scrip not to be entered
by said States, but to be sold by them and subject to entry by their assignees:
Provided, That none of it shall be sold at less than $1 per acre, under penalty
of forfeiture of the same to the United States.
'Third. That the expenses of
the management and superintendence of said lands and of the moneys received therefrom shall be paid by the States to which they may
belong out of the treasury of said States.
'Fourth.
That the gross proceeds of the sales of such lands or land scrip so granted
shall be invested by the several States in safe stocks, to constitute a
perpetual fund, the principal of which shall remain forever undiminished, and
the interest to be appropriated to the maintenance of the indigent insane
within the several States.
'Fifth. That annual returns of
lands or scrip sold shall be made by the States to the Secretary of the
Interior, and the whole grant be subject to certain
conditions and limitations prescribed in the bill, to be assented to by
legislative acts of said States.
'This
bill therefore proposes that the Federal Government shall make provision to the
amount of the value of 10,000,000 acres of land for an eleemosynary object
within the several States, to be administered by the political authority of the
same; and it presents at the threshold the question whether any such act on the
part of the Federal Government is warranted and sanctioned by the Constitution,
the provisions and principles of which are to be protected and sustained as a
first and paramount duty. [301 U.S. 548, 602] 'It
can not be questioned that if Congress has power to make provision for the
indigent insane without the limits of this District it has the same power to
provide for the indigent who are not insane, and thus to transfer to the
Federal Government the charge of all the poor in all the States. It has the
same power to provide hospitals and other local establishments for the care and
cure of every species of human infirmity, and thus to assume all that duty of
either public philanthropy or public necessity to the dependent, the orphan,
the sick, or the needy which is now discharged by the States themselves or by
corporate institutions or private endowments existing under the legislation of
the States. The whole field of public beneficence is thrown open to the care and
culture of the Federal Government. Generous impulses no longer encounter the
limitations and control of our imperious fundamental law; for however worthy
may be the present object in itself, it is only one of a class. It is not
exclusively worthy of benevolent regard. Whatever considerations dictate
sympathy for this particular object apply in like manner, if not in the same
degree, to idiocy, to physical disease, to extreme destitution. If Congress may
and ought to provide for any one of these objects, it may and ought to provide
for them all. And if it be done in this case, what answer shall be given when
Congress shall be called upon, as it doubtless will be, to pursue a similar
course of legislation in the others? It will obviously be vain to reply that
the object is worthy, but that the application has taken a wrong direction. The
power will have been deliberately assumed, the general obligation will by this
act have been acknowledged, and the question of means and expediency will alone
be left for consideration. The decision upon the principle in any one case
determines it for the whole class. The question presented, therefore, clearly
is upon the constitutionality and propriety of the Federal Gov- [301
U.S. 548, 603] ernment
assuming to enter into a novel and vast field of legislation, namely, that of
providing for the care and support of all those among the people of the United
States who by any form of calamity become fit objects of public philanthropy.
'I
readily and, I trust, feelingly acknowledge the duty incumbent on us all as men
and citizens, and as among the highest and holiest of our duties, to provide
for those who, in the mysterious order of Providence, are subject to want and
to disease of body or mind; but I can not find any authority in the
Constitution for making the Federal Government the great almoner of public
charity throughout the United States. To do so would, in my judgment, be
contrary to the letter and spirit of the Constitution and subversive of the
whole theory upon which the Union of these States is founded. And if it were
admissible to contemplate the exercise of this power for any object whatever, I
can not avoid the belief that it would in the end be prejudicial rather than
beneficial in the noble offices of charity to have the charge of them
transferred from the States to the Federal Government. Are we not too prone to
forget that the Federal Union is the creature of the States, not they of the
Federal Union? We were the inhabitants of colonies distinct in local government
one from the other before the Revolution. By the Revolution the colonies each
became an independent State. They achieved that independence and secured its
recognition by the agency of a consulting body, which, from being an assembly
of the ministers of distinct sovereignties instructed to agree to no form of
government which did not leave the domestic concerns of each State to itself,
was appropriately denominated a Congress. When, having tried the experiment of
the Confederation, they resolved to change that for the present Federal Union,
and thus to confer on the Federal Government more ample authority, they
scrupulously measured such of the [301 U.S. 548, 604] functions
of their cherished sovereignty as they chose to delegate to the General
Government. With this aim and to this end the fathers of the Republic framed
the Constitution, in and by which the independent and sovereign States united
themselves for certain specified objects and purposes, and for those only,
leaving all powers not therein set forth as conferred on one or another of the
three great departments-the legislative, the executive, and the
judicial-indubitably with the States. And when the people of the several States
had in their State conventions, and thus alone, given effect and force to the
Constitution, not content that any doubt should in future arise as to the scope
and character of this act, they ingrafted thereon the
explicit declaration that 'the powers not delegated to the United States by the
Constitution nor prohibited by it to the States are reserved to the States
respectively or to the people.'
'Can
it be controverted that the great mass of the
business of Government-that involved in the social relations, the internal
arrangements of the body politic, the mental and moral culture of men, the
development of local resources of wealth, the punishment of crimes in general,
the preservation of order, the relief of the needy or otherwise unfortunate
members of society-did in practice remain with the States; that none of these
objects of local concern are by the Constitution expressly or impliedly
prohibited to the States, and that none of them are by any express language of
the Constitution transferred to the United States? Can it be claimed that any
of these functions of local administration and legislation are vested in the
Federal Government by any implication? I have never found anything in the
Constitution which is susceptible of such a construction. No one of the
enumerated powers touches the subject or has even a remote analogy to it. The
powers conferred upon the United States have reference to federal relations, or
to the means of accom- [301 U.S. 548, 605] plishing or executing things of
federal relation. So also of the same character are the powers taken away from
the States by enumeration. In either case the powers granted and the powers
restricted were so granted or so restricted only where it was requisite for the
maintenance of peace and harmony between the States or for the purpose of
protecting their common interests and defending their common sovereignty
against aggression from abroad or insurrection at home.
'I
shall not discuss at length the question of power sometimes claimed for the
General Government under the clause of the eighth section of the Constitution,
which gives Congress the power 'to lay and collect taxes, duties, imposts, and
excises, to pay debts and provide for the common defense and general welfare of
the United States,' because if it has not already been settled upon sound
reason and authority it never will be. I take the received and just
construction of that article, as if written to lay and collect taxes, duties,
imposts, and excises in order to pay the debts and in order to provide for the
common defense and general welfare. It is not a substantive general power to
provide for the welfare of the United States, but is a limitation on the grant
of power to raise money by taxes, duties, and imposts. If it were otherwise,
all the rest of the Constitution, consisting of carefully enumerated and
cautiously guarded grants of specific powers, would have been useless, if not
delusive. It would be impossible in that view to escape from the conclusion
that these were inserted only to mislead for the present, and, instead of
enlightening and defining the pathway of the future, in involve its action in
the mazes of doubtful construction. Such a conclusion the character of the men
who framed that sacred instrument will never permit us to form. Indeed, to
suppose it susceptible of any other construction would be to consign all the
rights of the States and of the people of the States to the mere discre- [301 U.S. 548, 606] tion of Congress, and thus to clothe
the Federal Government with authority to control the sovereign States, by which
they would have been dwarfed into provinces or departments and all sovereignty
vested in an absolute consolidated central power, against which the spirit of
liberty has so often and in so many countries struggled in vain.
'In
my judgment you can not by tributes to humanity make any adequate compensation
for the wrong you would inflict by removing the sources of power and political
action from those who are to be thereby affected. If the time shall ever arrive
when, for an object appealing, however strongly, to our sympathies, the dignity
of the States shall bow to the dictation of Congress by conforming their
legislation thereto, when the power and majesty and honor of those who created
shall become subordinate to the thing of their creation, I but feebly utter my
apprehensions when I express my firm conviction that we shall see 'the
beginning of the end.'
'Fortunately,
we are not left in doubt as to the purpose of the Constitution any more than as
to its express lauguage, for although the history of its
formation, as recorded in the Madison Papers, shows that the Federal Government
in its present form emerged from the conflict of opposing influences which have
continued to divide statesmen from that day to this, yet the rule of clearly
defined powers and of strict construction presided over the actual conclusion
and subsequent adoption of the Constitution. President Madison, in the
Federalist, says:
"The
powers delegated to the proposed Constitution are few and defined. Those which
are to remain in the State governments are numerous and indefinite. ... Its
(the General Government's) jurisdiction extends to certain enumerated objects
only, and leaves to the several States a residuary and inviolable sovereignty
over all other objects.' [301 U.S. 548, 607] 'In the same spirit
President Jefferson invokes 'the support of the State governments in all their
rights as the most competent administrations for our domestic concerns and the
surest bulwarks against anti-republican tendencies;' and President Jackson said
that our true strength and wisdom are not promoted by invasions of the rights
and powers of the several States, but that, on the contrary, they consist 'not
in binding the States more closely to the center, but in leaving each more
unobstructed in its proper orbit.'
'The
framers of the Constitution, in refusing to confer on the Federal Government
any jurisdiction over these purely local objects, in my judgment manifested a
wise forecast and broad comprehension of the true interests of these objects
themselves. It is clear that public charities Within the States can be
efficiently administered only by their authority. The bill before me concedes
this, for it does not commit the funds it provides to the administration of any
other authority.
'I
can not but repeat what I have before expressed, that if the several States,
many of which have already laid the foundation of munificent establishments of
local beneficence, and nearly all of which are proceeding to establish them,
shall be led to suppose, as, should this bill become a law, they will be, that
Congress is to make provision for such objects the fountains of charity will be
dried up at home and the several States instead of bestowing their own means on
the social wants of their own people may themselves, through the strong
temptation which appeals to states as to individuals, become humble suppliants
for the bounty of the Federal Government, reversing their true relations to
this Union. ...
'I
have been unable to discover any distinction on constitutional grounds or
grounds of expediency between an appropriation of $10,000,000 directly from the
money in [301 U.S. 548, 608] the Treasury for the
object contemplated and the appropriation of lands presented for my sanction,
and yet I can not doubt that if the bill proposed $10,000,000 from the Treasury
of the United States for the support of the indigent insane in the several
States that the constitutional question involved in the act would have
attracted forcibly the attention of Congress.
'I
respectfully submit that in a constitutional point of view it is wholly
immaterial whether the appropriation be in money or in
land. ...
'To
assume that the public lands are applicable to ordinary State objects, whether
of public structures, police, charity, or expenses of State administration,
would be to disregard to the amount of the value of the public lands all the
limitations of the Constitution and confound to that extent all distinctions
between the rights and powers of the States and those of the United States; for
if the public lands may be applied to the support of the poor, whether sane or
insane, if the disposal of them and their proceeds be not subject to the
ordinary limitations of the Constitution, then Congress possesses unqualified
power to provide for expenditures in the States by means of the public lands,
even to the degree of defraying the salaries of governors, judges, and all
other expenses of the government and internal administration within the several
States.
'The
conclusion from the general survey of the whole subject is to my mind
irresistible, and closes the question both of right and of expediency so far as
regards the principle of the appropriation proposed in this bill. Would not the
admission of such power in Congress to dispose of the public domain work the
practical abrogation of some of the most important provisions of the
Constitution? ... [301 U.S. 548, 609] 'The general result at
which I have arrived is the necessary consequence of those views of the
relative rights, powers, and duties of the States and of the Federal Government
which I have long entertained and often expressed and in reference to which my
convictions do but increase in force with time and experience.'
No
defense is offered for the legislation under review upon the basis of
emergency. The hypothesis is that hereafter it will continuously benefit
unemployed members of a class. Forever, so far as we can see, the states are
expected to function under federal direction concerning an internal matter. By
the sanction of this adventure, the door is open for progressive inauguration
of others of like kind under which it can hardly be expected that the states
will retain genuine independence of action. And without independent states a
Federal Union as contemplated by the Constitution becomes impossible.
At
the bar counsel asserted that under the present act the tax upon residents of
Alabama during the first year will total $9,000,000. All would remain in the
Federal Treasury but for the adoption by the state of measures agreeable to the
National Board. If continued, these will bring relief from the payment of
$8,000,000 to the United States.
Ordinarily,
I must think, a denial that the challenged action of Congress and what has been
done under it amount to coercion and impair freedom of government by the people
of the state would be regarded as contrary to practical experience.
Unquestionably our federate plan of government confronts an enlarged peril.
Separate
opinion of Mr. Justice SUTHERLAND.
With
most of what is said in the opinion just handed down, I concur. I agree that
the pay roll tax levied is an excise within the power of Congress; that the
devotion of [301 U.S. 548, 610] not more than 90 per
cent. of it to the credit of employers in states which require the payment of a
similar tax under so-called unemployment- tax laws is not an unconstitutional
use of the proceeds of the federal tax; that the provision making the adoption
by the state of an unemployment law of a specified character a condition
precedent to the credit of the tax does not render the law invalid. I agree
that the states are not coerced by the federal legislation into adopting
unemployment legislation. The provisions of the federal law may operate to
induce the state to pass an employment law if it regards such action to be in
its interest. But that is not coercion. If the act stopped here, I should
accept the conclusion of the court that the legislation is not
unconstitutional.
But
the question with which I have difficulty is whether the administrative
provisions of the act invade the governmental administrative powers of the
several states reserved by the Tenth Amendment. A state may enter into
contracts; but a state cannot, by contract or statute, surrender the execution,
or a share in the execution, of any of its governmental powers either to a
sister state or to the federal government, any more than the federal government
can surrender the control of any of its governmental powers to a foreign
nation. The power to tax is vital and fundamental, and, in the highest degree,
governmental in character. Without it, the state could not exist. Fundamental
also, and no less important, is the governmental power to expend the moneys
realized from taxation, and exclusively to administer the laws in respect of the
character of the tax and the methods of laying and collecting it and expending
the proceeds.
The
people of the United States, by their Constitution, have affirmed a division of
internal governmental powers between the federal government and the governments
of the several states-committing to the first its powers by express grant and
necessary implication; to the latter, or [301 U.S. 548, 611] to
the people, by reservation, 'the powers not delegated to the United States by
the Constitution, nor prohibited by it to the States.' The Constitution thus
affirms the complete supremacy and independence of the state within the field
of its powers. Carter v. Carter Coal Co., 298
U.S. 238, 295 , 56 S.Ct.
855, 865. The federal government has no more authority to invade that field
than the state has to invade the exclusive field of national governmental
powers; for, in the oft-repeated words of this court in Texas v. White, 7 Wall.
700, 725, 'the preservation of the States, and the maintenance of their
governments, are as much within the design and care of the Constitution as the
preservation of the Union and the maintenance of the National government.' The
necessity of preserving each from every form of illegitimate intrusion or
interference on the part of the other is so imperative as to require this
court, when its judicial power is properly invoked, to view with a careful and
discriminating eye any legislation challenged as constituting such an intrusion
or interference. See South Carolina v. United States, 199
U.S. 437, 448 , 26 S.Ct.
110, 4 Ann.Cas. 737.
The
precise question, therefore, which we are required to answer by an application
of these principles is whether the congressional act contemplates a surrender
by the state to the federal government, in whole or in part, of any state
governmental power to administer its own unemployment law or the state pay
roll-tax funds which it has collected for the purposes of that law. An
affirmative answer to this question, I think, must be made.
I
do not, of course, doubt the power of the state to select and utilize a
depository for the safe-keeping of its funds; but it is quite another thing to
agree with the selected depository that the funds shall be withdrawn for
certain stipulated purposes, and for no other. Nor do I doubt the authority of
the federal government and a state government to co- operate to a common end,
pro- [301 U.S. 548, 612] vided each of them is
authorized to reach it. But such co-operation must be effectuated by an
exercise of the powers which they severally possess, and not by an exercise,
through invasion or surrender, by one of them of the governmental power of the
other.
An
illustration of what I regard as permissible co-operation is to be found in
title I of the act now under consideration. By that title, federal
appropriations for oldage assistance are authorized
to be made to any state which shall have adopted a plan for old-age assistance
conforming to designated requirements. But the state is not obliged, as a
condition of having the federal bounty, to deposit in the federal treasury
funds raised by the state. The state keeps its own funds and administers its
own law in respect of them, without let or hindrance of any kind on the part of
the federal government; so that we have simply the familiar case of federal aid
upon conditions which the state, without surrendering any of its powers, may
accept or not as it chooses. Massachusetts v. Mellon, 262
U.S. 447, 480 , 482 S., 483, 43 S.Ct. 597, 598, 599.
But
this is not the situation with which we are called upon to deal in the present
case. For here, the state must deposit the proceeds of its taxation in the
federal treasury, upon terms which make the deposit suspiciously like a forced
loan to be repaid only in accordance with restrictions imposed by federal law.
Title IX, 903(a)(3), 904(a), (b), ( e), 42 U.S.C.A.
1103(a) (3), 1104(a, b, e). All moneys withdrawn from this fund must be used
exclusively for the payment of compensation. Section 903(a)(4),
42 U.S.C.A. 1103(a)(4). And this compensation is to be paid through public
employment offices in the state or such other agencies as a federal board may
approve. Section 903(a)(1), 42 U.S.C.A. 1103(a)(1).
The act, it is true, recognizes section 903(a)(6), 42
U.S.C.A . 1103(a)(6) the power of the Legislature to
amend or repeal its compensation law at any time. But there
is nothing in the act, as I read it, which justifies the conclusion that the
state may, in that event, unconditionally withdraw its [301
U.S. 548, 613] funds from the federal treasury. Section 903(b),
42 U.S.C.A. 1103(b), provides that the board shall certify in each taxable year
to the Secretary of the Treasury each state whose law has been approved. But
the board is forbidden to certify any state which the board finds has so
changed its law that it no longer contains the provisions specified in
subsection (a), 'or has with respect to such taxable year failed to comply
substantially with any such provision.' The federal government, therefore, in
the person of its agent, the board, sits not only as a perpetual overseer,
interpreter and censor of state legislation on the subject, but, as lord
paramount, to determine whether the state is faithfully executing its own
law-as though the state were a dependency under pupilage1 and not to be
trusted. The foregoing, taken in connection with the provisions that money
withdrawn can be used only in payment of compensation and that it must be paid
through an agency approved by the federal board, leaves it, to say the least,
highly uncertain whether the right of the state to withdraw any part of its own
funds exists, under the act, otherwise than upon these various statutory
conditions. It is true also that subsection ( f) of
section 904, 42 U.S.C.A. 1104(f), authorizes the Secretary of the Treasury to
pay to any state agency 'such amount as it may duly requisition, not exceeding
the amount standing to the account of such State agency at the time of such
payment.' But it is to be observed that the payment is to be made to the state agency, and only such amount as that agency may duly
requisition. It is hard to find in this provision any extension of the right of
the state to withdraw its funds except in the manner and for the specific
purpose prescribed by the act.
By
these various provisions of the act, the federal agencies are authorized to
supervise and hamper the administrative powers of the state to a degree which
not only does not comport with the dignity of a quasi sov-
[301 U.S. 548, 614] ereign
state-a matter with which we are not judicially concerned-but which deny to it
that supremacy and freedom from external interference in respect of its affairs
which the Constitution contemplates-a matter of very definite judicial concern.
I refer to some, though by no means all, of the cases in point.
In the License Cases, 5 How.
504, 588, Mr. Justice McLean said that the federal government was supreme
within the scope of its delegated powers, and the state governments equally
supreme in the exercise of the powers not delegated nor inhibited to them; that
the states exercise their powers over everything connected with their social
and internal condition; and that over these subjects the federal government had
no power. 'They appertain to the State sovereignty as exclusively as powers
exclusively delegated appertain to the general government.'
In Tarble's Case, 13 Wall.
397, Mr. Justice Field, after pointing out that the general government and the
state are separate and distinct sovereignties, acting separately and independently
of each other within their respective spheres, said that, except in one
particular, they stood in the same independent relation to each other as they
would if their authority embraced distinct territories. The one particular
referred to is that of the supremacy of the authority of the United States in
case of conflict between the two.
In
Farrington v. Tennessee, 95 U.S. 679 , 685, this court said, 'Yet every State has a
sphere of action where the authority of the national government may not
intrude. Within that domain the State is as if the union were
not. Such are the checks and balances in our complicated but wise system of
State and national polity.'
'The
powers exclusively given to the federal government,' it was said in Worcester
v. State of Georgia, 6 Pet. 515, 570, 'are limitations upon the state
authorities. But [301 U.S. 548, 615] with the exception of
these limitations, the states are supreme; and their sovereignty can be no more
invaded by the action of the general government, than the action of the state
governments can arrest or obstruct the course of the national power.'
The
force of what has been said is not broken by an acceptance of the view that the
state is not coerced by the federal law. The effect of the dual distribution of
powers is completely to deny to the states whatever is granted exclusively to
the nation, and, conversely, to deny to the nation whatever is reserved
exclusively to the states. 'The determination of the Framers
Convention and the ratifying conventions to preserve complete and
unimpaired state self-government in all matters not committed to the general
government is one of the plainest facts which emerges from the history of their
deliberations. And adherence to that determination is incumbent equally upon
the federal government and the states. State powers can neither be appropriated
on the one hand nor abdicated on the other.' Carter v. Carter Coal Co., supra, 298
U.S. 238 , at page 295, 56 S.Ct.
855, 866. The purpose of the Constitution in that regard does not admit of
doubt or qualification; and it can be thwarted no more by voluntary surrender
from within than by invasion from without.
Nor
may the constitutional objection suggested be overcome by the expectation of
public benefit resulting from the federal participation authorized by the act.
Such expectation, if voiced in support of a proposed constitutional enactment,
would be quite proper for the consideration of the legislative body. But, as we
said in the Carter Case, supra, 298
U.S. 238 , at page 291, 56 S.Ct. 855, 864, 'nothing
is more certain than that beneficent aims, however great or well directed, can
never serve in lieu of constitutional power.' Moreover, everything which the
act seeks to do for the relief of unemployment might have been accomplished, as
is done by this same act for the relief of the misfortunes of old age, with- [301
U.S. 548, 616] out obliging the state to surrender, or share with another
government, any of its powers.
If
we are to survive as the United States, the balance between the powers of the
nation and those of the states must be maintained. There is grave danger in
permitting it to dip in either direction, danger-if there were no other-in the
precedent thereby set for further departures from the equipoise. The threat
implicit in the present encroachment upon the administrative functions of the
states is that greater encroachments, and encroachments upon other functions,
will follow.
For
the foregoing reasons, I think the judgment below should be reversed.
Mr.
Justice VAN DEVANTER joins in this opinion.
Mr. Justice BUTLER, dissenting.
I
think that the objections to the challenged enactment expressed in the separate
opinions of Mr. Justice McREYNOLDS and Mr. Justice
SUTHERLAND are well taken. I am also of opinion that, in principle and as
applied to bring about and to gain control over state unemployment
compensation, the statutory scheme is repugnant to the Tenth Amendment: 'The
powers not delegated to the United States by the Constitution, nor prohibited
by it to the States, are reserved to the States respectively, or to the
people.' The Constitution grants to the United States no power to pay
unemployed persons or to require the states to enact laws or to raise or
disburse money for that purpose. The provisions in question, if not amounting
to coercion in a legal sense, are manifestly designed and intended directly to
affect state action in the respects specified. And, if valid as so employed,
this 'tax and credit' device may be made effective to enable federal
authorities to induce, if not indeed to compel, state enactments for any
purpose within the realm of [301 U.S. 548, 617] state
power and generally to control state administration of state laws.
The
act creates a Social Security Board and imposes upon it the duty of studying
and making recommendations as to legislation and as to administrative policies
concerning unemployment compensation and related subjects. Section
702, 42 U.S.C.A. 902. It authorizes grants of money by the United States
to States for old age assistance, for administration of unemployment
compensation, for aid to dependent children, for maternal and child welfare and
for public health. Each grant depends upon state compliance with conditions
prescribed by federal authority. The amounts given being within the discretion
of the Congress, it may at any time make available federal money sufficient
effectively to influence state policy, standards and details of administration.
The
excise laid by section 901 (42 U.S.C.A. 1101) is
limited to specified employers. It is not imposed to raise money to pay
unemployment compensation. But it is imposed having regard to that subject for,
upon enactment of state laws for that purpose in conformity with federal
requirements specified in the act, each of the employers subject to the federal
tax becomes entitled to credit for the amount he pays into an unemployment fund
under a state law up to 90 per cent. of the federal
tax. The amounts yielded by the remaining 10 per cent., not assigned to any
specific purpose, may be applied to pay the federal contributions and expenses
in respect of state unemployment compensation. It is not yet possible to
determine more closely the sums that will be needed for these purposes.
When
the federal act was passed, Wisconsin was the only state paying unemployment
compensation. Though her plan then in force is by students of the subject
generally deemed the best yet devised, she found it necessary to change her law
in order to secure federal approval. In the absence of that, Wisconsin
employers subject to the [301 U.S. 548, 618] federal tax would not
have been allowed any deduction on account of their contribution to the state
fund. Any state would be moved to conform to federal requirements, not utterly
objectionable, in order to save its taxpayers from the federal tax imposed in
addition to the contributions under state laws.
Federal
agencies prepared and took draft bills to state Legislatures to enable and
induce them to pass laws providing for unemployment compensation in accordance
with federal requirements and thus to obtain relief for the employers from the
impending federal exaction. Obviously the act creates the peril of federal tax
not to raise revenue but to persuade. Of course, each state was free to reject
any measure so proposed. But, if it failed to adopt a plan acceptable to
federal authority, the full burden of the federal tax would be exacted. And, as
federal demands similarly conditioned may be increased from time to time as
Congress shall determine, possible federal pressure in
that field is without limit. Already at least forty-three states, yielding to
the inducement resulting immediately from the application of the federal tax
and credit device, have provided for unemployment compensation in form to merit
approval of the Social Security Board. Presumably the remaining States will
comply whenever convenient for their Legislatures to pass the necessary laws.
The
terms of the measure make it clear that the tax and credit device was intended
to enable federal officers virtually to control the exertion of powers of the
states in a field in which they alone have jurisdiction and from which the
United States is by the Constitution excluded.
I
am of opinion that the judgment of the Circuit Court of Appeals should be
reversed.
Footnotes
[ Footnote 1 ] Sec. 903. (a) The Social Security Board shall approve any
State law submitted to it, within thirty days of such submission, which it
finds provides that-
(1)
All compensation is to be paid through public employment offices in the State
or such other agencies as the Board may approve;
(2)
No compensation shall be payable with respect to any day of unemployment
occurring within two years after the first day of the first period with respect
to which contributions are required;
(3)
All money received in the unemployment fund shall immediately upon such receipt
be paid over to the Secretary of the Treasury to the credit of the Unemployment
Trust Fund established by Section 904 (section 1104 of this chapter);
(4)
All money withdrawn from the Unemployment Trust Fund by the State agency shall
be used solely in the payment of compensation, exclusive of expenses of
administration;
(5)
Compensation shall not be denied in such State to any otherwise eligible
individual for refusing to accept new work under any of the following
conditions: (A) If the position offered is vacant due directly to a strike,
lockout, or other labor dispute; (B) if the wages, hours, or other conditions
of the work offered are substantially less favorable to the individual than
those prevailing for similar work in the locality; (C) if as a condition of
being employed the individual would be required to join a company union or to
resign from or refrain from joining any bona fide labor organization;
(6)
All the rights, privileges, or immunities conferred by such law or by acts done
pursuant thereto shall exist subject to the power of the legislature to amend
or repeal such law at any time.
The
Board shall, upon approving such law, notify the Governor of the State of its
approval.
(b)
On December 31 in each taxable year the Board shall certify to the Secretary of
the Treasury each State whose law it has previously approved, except that it
shall not certify any State which, after reasonable notice and opportunity for
hearing to the State agency, the Board finds has changed its law so that it no
longer contains the provisions specified in subsection (a) or has with respect
to such taxable year failed to comply substantially with any such provision.
(c)
If, at any time during the taxable year, the Board has reason to believe that a
State whose law it has previously approved, may not be certified under
subsection (b), it shall promptly so notify the Governor of such State.
[ Footnote 2 ] Sec. 904. (a) There is hereby established in the Treasury of
the United States a trust fund to be known as the 'Unemployment Trust Fund,'
hereinafter (in this title) called the 'Fund'. The Secretary of the Treasury is
authorized and directed to receive and hold in the Fund all moneys deposited
therein by a State agency from a State unemployment fund. Such deposit may be
made directly with the Secretary of the Treasury or with any Federal reserve bank or member bank of the Federal Reserve System
designated by him for such purpose.
(b)
It shall be the duty of the Secretary of the Treasury to invest such portion of
the Fund as is not, in his judgment, required to meet current withdrawals. Such
investment may be made only in interest bearing obligations of the United
States or in obligations guaranteed as to both principal and interest by the
United States. For such purpose such obligations may be acquired (1) on
original issue at par, or (2) by purchase of outstanding obligations at the
market price. The purposes for which obligations of the United States may be
issued under the Second Liberty Bond Act, as amended (section 752 of Title 31),
are hereby extended to authorize the issuance at par of special obligations
exclusively to the Fund. Such special obligations shall bear interest at a rate
equal to the average rate of interest, computed as of the end of the calendar
month next preceding the date of such issue, borne by all interest-bearing
obligations of the United States then forming part of the public debt; except
that where such average rate is not a multiple or one- eighth of 1 per centum,
the rate of interest of such special obligations shall be the multiple of
one-eighth of 1 per centum next lower than such average rate. Obligations other
than such special obligations may be acquired for the Fund only on such terms
as to provide an investment yield not less than the yield which would be
required in the case of special obligations if issued to the Fund upon the date
of such acquisition.
(c)
Any obligations acquired by the Fund (except special obligations issued
exclusively to the Fund) may be sold at the market price, and such special
obligations may be redeemed at par plus accrued interest.
(d)
The interest on, and the proceeds from the sale or redemption of, any
obligations held in the Fund shall be credited to and form a part of the Fund.
(e)
The Fund shall be invested as a single fund, but the Secretary of the Treasury
shall maintain a separate book account for each State agency and shall credit
quarterly on March 31, June 30, September 30, and December 31, of each year, to
each account, on the basis of the average daily balance of such account, a
proportionate part of the earnings of the Fund for the quarter ending on such
date.
(f)
The Secretary of the Treasury is authorized and directed to pay out of the Fund
to any State agency such amount as it may duly requisition, not exceeding the
amount standing to the account of such State agency at the time of such
payment.
[ Footnote 3 ] The
list of services is comprehensive. It included: 'Maitre d'Hotel,
House-steward, Master of the House, Groom of the Chamber, Valet de Chambre, Butler, Under-butler, Clerk of the Kitchen,
Confectioner, Cook, House- porter, Footman, Running-footman, Coachman, Groom, Postillion, Stable-boy, and the respective Helpers in the
Stables of such Coachman, Groom, or Postillion, or in
the Capacity of Gardener (not being a Day-labourer),
Park-keeper, Game-keeper, Huntsman, Whipper-in. ...'
[ Footnote 4 ] The
statute, amended from time to time, but with its basic structure unaffected, is
on the statute books today. Act of 1803, 43 George III, c. 161; Act of 1812, 52
George III, c. 93; Act of 1853, 16 & 17 Vict., c.
90; Act of 1869, 32 & 33 Vict., c. 14. 24 Halsbury's Laws of England, 1st ed.,
p. 692 et seq.
[ Footnote 5 ] See,
also, the following laws imposing occupation taxes: 12 Hening's
Statutes of Virginia, p. 285, Act of 1786; Chandler, The Colonial Records of
Georgia, vol. 19, Part 2, p. 88, Act of 1778; 1 Potter, Taylor and Yancey,
North Carolina Revised Laws, p. 501, Act of 1784.
[ Footnote 6 ] The
cases are brought together by Prof. John MacArthur Maguire in an essay, 'Taxing
the Exercise of National Rights' (Harvard Legal Essays, 1934, pp. 273, 322).
The
Massachusetts decisions must be read in the light of the particular definitions
and restrictions of the Massachusetts Constitution. Opinions of the Justices,
282 Mass. 619, 622, 186 N.E. 490; Id., 266 Mass. 590, 593, 165 N.E. 904, 63 A.L.R. 952. And see Howes
Brothers Co. v. Massachusetts Unemployment Compensation Commission, supra, 5
N.E.(2d) 720, at pages 730, 731.
[ Footnote 7 ]
Alabama General Acts, 1935, No. 194, art. 13, 348 et seq. (flat license tax on
occupations); Arizona Revised Code, Supplement (1936) 3138a et seq. (general
gross receipts tax); Connecticut General Statutes, Supplement (1935) 457c, 458c
(gross receipts tax on unincorporated businesses); Revised Code of Delaware
(1935) 192-197 (flat license tax on occupations); Compiled Laws of Florida,
Permanent Supplement (1936) Vol. 1, 1279 (1) et seq. (flat license tax on
occupations); Georgia Laws, 1935, p. 11 (flat license tax on occupations);
Indiana Statutes Ann. (1933 ) 64-2601 et seq. (general gross receipts tax);
Louisiana Laws, 3rd Extra Session, 1934, Act No. 15, 1st Extra Session, 1935,
Acts Nos. 5, 6 ( general gross receipts tax); Mississippi Laws, 1934, c. 119
(general gross receipts tax); New Mexico Laws, 1935, c. 73 (general gross
receipts tax); South Dakota Laws, 1933, c. 184 (general gross receipts tax,
expired June 30, 1935); Washington Laws, 1935, c. 180, title 2, p. 709 (general
gross receipts tax); West Virginia Code, Supplement (1935) 960 (general gross
receipts tax).
[ Footnote 8 ] The total estimated receipts without taking into account the 90 per
cent. deduction, range from $225,000,000 in the
first year to over $900, 000,000 seven years later. Even if the maximum credits
are available to taxpayers in all states, the maximum estimated receipts from
Title IX will range between $22,000,000, at one extreme, to $90,000,000 at the
other. If some of the states hold out in their unwillingness to pass statutes
of their own, the receipts will be still larger.
[ Footnote 9 ] The
attitude of Massachusetts is significant. Her act became a law August 12, 1935,
two days before the federal act. Even so, she prescribed that its provisions
should not become operative unless the federal bill became a law, or unless
eleven of the following states (Alabama, Connecticut, Delaware, Georgia,
Illinois, Indiana, Iowa, Maine, Maryland, Michigan, Minnesota, Missouri, New
Hampshire, New Jersey, New York, North Carolina, Ohio, Rhode Island, South
Carolina, Tennessee, Vermont) should impose on their
employers burdens substantially equivalent. St. of 1935, c. 479, p. 655. Her
fear of competition is thus forcefully attested. See, also, California St.1935,
c. 352, art. 1, 2; Idaho Laws 1936 (Third Extra Session) c.
12, 26; Mississippi Laws, 1936, c. 176, 2-a.
[ Footnote 10 ]
Perkins, State Action under the Federal Estate Tax Credit Clause, 13 North
Carolina L. Rev. 271, 280.
[ Footnote 11 ] See
note 1, supra.
[ Footnote 12 ] See
note 2, supra.
[ Footnote 13 ] 'This
last provision will not only afford maximum safety for these funds but is very essential
to insure that they will operate to promote the stability of business rather
than the reverse. Unemployment reserve funds have the peculiarity that the
demands upon them fluctuate considerably, being heaviest when business
slackens. If, in such times, the securities in which these funds are invested
are thrown upon the market for liquidation, the net effect is likely to be
increased deflation. Such a result is avoided in this bill through the
provision that all reserve funds are to be held by the United States Treasury,
to be invested and liquidated by the Secretary of the Treasury in a manner
calculated to promote business stability. When business conditions are such
that investment in securities purchased on the open market is unwise, the Secretary
of the Treasury may issue special nonnegotiable obligations exclusively to the
unemployment trust fund. When a reverse situation exists and heavy drains are
made upon the fund for payment of unemployment benefits, the Treasury does not
have to dispose of the securities belonging to the fund in open market but may
assume them itself. With such a method of handling the reserve funds, it is
believed that this bill will solve the problem often raised in discussions of
unemployment compensation, regarding the possibility of transferring purchasing
power from boom periods to depression periods. It will in fact operate to
sustain purchasing power at the onset of a depression without having any
counteracting deflationary tendencies.' House Report, No. 615, 74th Congress,
1st session, p. 9.
[ Footnote 14 ] Cf.
12 Stat. 503 (7 U.S.C.A. 301 et seq.); 26 Stat. 417 (7 U.S.C. A. 321 et seq.).
[ Footnote 1 ]
'Messages and Papers of the President' by James D. Richardson, Vol. V, pp. 247-256.
[ Footnote 1 ]
Compare Snow v. United States, 18 Wall. 317, 319, 320.