United States v. Butler, 297 U.S. 1

Supreme Court of the United States

1936

Chapter

3

Title

The Scope of Congresss Powers

Page

284

Topic

Regulation through Taxing, Spending, and the War Power

Quick Notes

The 1933 Agriculture Adjustment Act authorized the Secretary of Agriculture to extend benefit/subsidy payments to farmers who agreed to reduce their planted acreage.  Processors of the covered crops were to be taxed to provide a fund for the benefit payments.  Butler was a receiver for a processor who had paid the tax.  Butler brought suit to recover the tax paid on grounds that it was part of an unconstitutional program to control agriculture production.

Separate spending power:

o         The Court first concluded that the power to "tax and spend for the general welfare" existed as a power separate and distinct from the other powers enumerated in Article I, 8.

Not usable for regulation:

o         But the Court rejected the contention that Congress had an independent power to "provide for the general welfare" apart from the power to tax and spend.

o         Thus Congress may not regulate in a particular area merely on the ground that it is thereby providing for the general welfare; it is only taxing and spending which may be done "for the general welfare."

Can't regulate for general welfare:

o         The most important principle for which US. v. Butler stands today is that Congress has no power to regulate for the purpose of providing for the "general welfare. "

o         Congress may spend for the general welfare, it may tax for the general welfare, but it may not regulate for the general welfare.

Reasoning

1.     The power of congress to authorize expenditures of public moneys for public purposes is not limited by the direct grants of legislative power found in the Constitution, but it does have limits.  Appropriations cannot be made as a means to an unconstitutional end.

2.     Regulation of agriculture production is not a power granted to Congress; therefore it is left to the states.  Attainment of such a prohibited end may not be accomplished through the use of granted powers (here the taxing powers).

3.     This scheme, purportedly voluntary, in reality involves purchasing, with federal funds, submission to federal regulation of a subject reserved to the states.  Because the end is invalid, it may not be accomplished indirectly through the taxing and spending power.

Book Name

Constitutional Law : Stone, Seidman, Sunstein, Tushnet.  ISBN:  978-0-7355-7719-0

Issue

o         Whether a tax may be employed to raise the money necessary to purchase compliance which the Congress is powerless to command?  No.

Procedure

Trial

o         The district court found the taxes valid and ordered them paid

Appellant

o         The United States Circuit Court of Appeals for the First Circuit reversed.

Supreme

o         Congress would exercise the power of taxing using prohibited means.

o         Affirmed

Facts

Discussion

Key Phrases

Rules

Pl United States (Appellant)

Df Butler (Appellee)

Description

o         The Agriculture Adjustment Act of 1933 was designed to stabilize production in agriculture by assuring farmers that their products would be sold at fair price.

o         The act imposed a tax on processors of agricultural commodities such as cotton.

o         The proceeds of the tax were to use used to subsidize farmers who agreed to restrict their production.

[Justice Roberts]

Misconception

o         The court assumes a power to overrules or control the actions of peoples representatives.

Congressional Act Appropriately Challenged

o         The Constitution is the supreme law of the land ordained and established by the people.

o         All legislation must conform to the principles it lays down.

o         When an act of Congress is appropriately challenged in the courts as not conforming to the constitutional mandate the judicial branch of the Government has only one duty, -- to lay the article of the Constitution which is invoked beside the statute which is challenged and to decide whether the [statute] squares with the [article].

Announce Judgment (Power of Judgment)

o         All the court does, or can do, is to announce its considered judgment upon the question

o         The only power it has is the power of judgment.

o         This court neither approves nor condemns any legislative policy.

Duty (Is a statute in Accordance or in Contravention with the Constitution)

o         To ascertain and declare whether the legislation is in accordance with, or in contravention of, the provisions of the Constitution; and, having done that, its duty ends.

The clauses thought to authorizes legislation

o         The clause thought to authorize the legislation, confers upon the Congress power "to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States. . . ."

The power to lay and collect taxes for the general welfare

o         The Government concedes that the phrase "to provide for the general welfare" qualifies the power "to lay and collect taxes."

No authoritatively accepted

o         The view that the clause grants power to provide for the general welfare, independently of the taxing power, has never been authoritatively accepted.

Mr. Story - Power to Tax, is undoubtedly granted

o         The true construction undoubtedly is that the ONLY thing granted is the power to tax for the purpose of providing funds for payment of the nation's debts and making provision for the general welfare.

Government Arg General welfare should cover anything conducive to national welfare

o         The argument  is that Congress may appropriate and authorize the spending of moneys for the "general welfare"; that the phrase should be liberally construed to cover anything conducive to national welfare;

o         The decision as to what will promote such welfare rests with Congress alone

o         The courts may not review its determination; and

o         The appropriation under attack was in fact for the general welfare of the United States

Sharp Difference of Opinion General Welfare

Madison Reference to other enumerated powers

o         It amounted to no more than a reference to the other powers enumerated in the subsequent clauses of the same section.

o         The grant of power to tax and spend for the general national welfare must be confined to the enumerated legislative fields committed to the Congress.

o         In this view the phrase is mere tautology [redundancy], for taxation and appropriation are or may be necessary incidents of the exercise of any of the enumerated legislative powers.

Hamilton Clause is separate and distinct from those enumerated

o         Hamilton maintained the clause confers a power separate and distinct from those later enumerated

o         The power is not restricted in meaning by the grant of them

o         Congress consequently has a substantive power to tax and to appropriate,

o         Limited only by the requirement that it shall be exercised to provide for the general welfare of the United States.

Court Agrees with Hamilton

o         The power to tax is not unlimited

o         Its confines are set in the clause which confers it, and not in those of 8 which bestow and define the legislative powers of the Congress.

o         It results that the power of Congress to authorize expenditure of public moneys for public purposes is not limited by the direct grants of legislative power found in the Constitution.

Scope of general welfare

o         Whether an appropriation in aid of agriculture falls within it.

Constitution prohibits the enforcement of the Agriculture Adjustment Act

o         The act invades the reserved rights of the states.

o         It is a statutory plan to regulate and control agricultural production, a matter beyond the powers delegated to the federal government.

o         The tax, the appropriation of the funds raised, and the direction for their disbursement, are but parts of the plan.

o         They are but means to an unconstitutional end.

Government Arg Constitutionally sound

o         Because the end is accomplished by voluntary co-operation.

Count Arg Regulation is not voluntary (Financial Ruin)

o         If the farmer refuses to comply, then he will loss benefits.

o         The amount offered to him exerts pressure on him to agree with regulation.

Example

o         If the cotton grower elects not to accept the benefits, he will receive less for his crops.

o         Those who receive payments will be able to undersell him.

o         Resulting in financial ruin.

Court - Submit to a regulation that otherwise could not be enforced.

o         Congress has no power to enforce its command on the farmer accomplished by taxing and spending to purchase compliance.

o         Enforcement is reserved to the states.

Court Schechter

o         Congress has not power to regulate wages and hours of labor in a local business.

o         If such a statute was allowed, Congress could appropriate money to be paid to employers from federal treasury where they have to agree to comply with the regulation on labor wages and hours.

Court Holding

o         Congress would exercise the power of taxing using prohibited means.

o         Affirmed.

[Justice Stone ] DISSENT

Courts are subject to two guiding principles of decision when reviewing statutes.

o         First, courts must concern themselves only with the power to enact the statute, not with the statute's wisdom.

o         Second, while legislation is subject to judicial restraint, the only check upon our own exercise of power is our own sense of self-restraint.

Statute No Coercion

o         The plan does not involve any coercion because threat of loss, not hope of gain, is the essence of economic coercion.

Removal of Unwise Legislation For the Political Process

o         The removal of unwise legislation lies not to the courts but to the political process.

o         An action that Congress induces by payments of money to promote the general welfare, but which it does not command or coerce, is but an incident to a specifically granted power, but a permissible means to a legitimate end.

o         The power to tax and spend includes the power to relieve a nationwide economic maladjustment by conditional gifts of money.

Rules

Rule

o         The taxing power may not be used to raise funds to purchase compliance in an area that Congress is powerless to command.

Class Notes

o          

Article 1, Section 8

Section 8.  Scope of Legislative Power

The power to tax

o    The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States;

The power to borrow money

o    To borrow money on the credit of the United States;

o    To regulate commerce with foreign nations, and among the several states, and with the Indian tribes;

o    To establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States;

o    To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;

o    To provide for the punishment of counterfeiting the securities and current coin of the United States;

o    To establish post offices and post roads;

o    To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries;  The power to create Patents

o    To constitute tribunals inferior to the Supreme Court;

o    To define and punish piracies and felonies committed on the high seas, and offenses against the law of nations;

o    To declare war, grant letters of marque and reprisal, and make rules concerning captures on land and water;

o    To raise and support armies, but no appropriation of money to that use shall be for a longer term than two years;

o    To provide and maintain a navy;

o    To make rules for the government and regulation of the land and naval forces;

o    To provide for calling forth the militia to execute the laws of the union, suppress insurrections and repel invasions;

o    To provide for organizing, arming, and disciplining, the militia, and for governing such part of them as may be employed in the service of the United States, reserving to the states respectively, the appointment of the officers, and the authority of training the militia according to the discipline prescribed by Congress;

o    To exercise exclusive legislation in all cases whatsoever, over such District (not exceeding ten miles square) as may, by cession of particular states, and the acceptance of Congress, become the seat of the government of the United States, and to exercise like authority over all places purchased by the consent of the legislature of the state in which the same shall be, for the erection of forts, magazines, arsenals, dockyards, and other needful buildings;--And

o    To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof.

Other Resources

THE SPENDING POWER

o         A. The spending power generally:

o    Article I, 8, gives Congress the power "[t]o lay and collect Taxes ... to pay the Debts and provide for the common Defence and general Welfare of the United States.... " The power to spend is thus linked to the power to tax - money may be raised by taxation, and then spent "for the common Defence and general Welfare of the United States."

o         B. Not limited to enumerated powers:

o    Prior to 1937, it was not clear whether Congress could spend for whatever purpose it wished (so long as the "general welfare" was being served), or whether Congress could only spend in order to carry out one of the other enumerated powers listed in Article I, 8.

o    Then, in U.S. v. Butler, 297 U.S. 1 (1936), the Court held that no such limitation exists - the spending (and taxing) powers are themselves enumerated powers, so Congress may spend (or tax) to achieve the general welfare, even though no other enumerated power is being furthered.

o    1. Facts of Butler:

o    Butler involved the validity of the Agricultural Adjustment Act of 1933, a New Deal measure which sought to raise farm prices by cutting back agricultural production. The scheme was to be carried out by authorizing the Secretary of Agriculture to contract with farmers to reduce their acreage under cultivation in return for benefit payments; the payments were in turn to be made from a fund generated by the imposition of a "processing tax" on the processing of the commodity.

o    2. Separate spending power:

o    The Court first concluded that the power to "tax and spend for the general welfare" existed as a power separate and distinct from the other powers enumerated in Article I, 8.

o    Thus the taxing-and-spending power stood on equal footing with, say, the power to regulate interstate commerce.

o    By this standard, there was no difficulty with the Agricultural Adjustment Act.

o    3. Not usable for regulation:

o    But the Court rejected the contention that Congress had an independent power to "provide for the general welfare" apart from the power to tax and spend.

o    Thus Congress may not regulate in a particular area merely on the ground that it is thereby providing for the general welfare; it is only taxing and spending which may be done "for the general welfare."

o    Otherwise, the Court noted, the federal government would be one of "general and unlimited powers," rather than enumerated and limited ones.

o    4. Can't regulate for general welfare:

o    The most important principle for which US. v. Butler stands today is that Congress has no power to regulate for the purpose of providing for the "general welfare. "

o    Congress may spend for the general welfare, it may tax for the general welfare, but it may not regulate for the general welfare.

o    (For this reason, a congressional regulatory scheme has to be justified as a reasonable means of carrying out some other enumerated power, typically the commerce power.