U.S. Supreme Court U.S. v. BUTLER, 297 U.S. 1 (1936)

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On July 14, 1933, the Secretary of Agriculture, with the approval of the President, proclaimed that he had determined rental and benefit payments should be made with respect to cotton; that the marketing year for that commodity was to begin August 1, 1933; and calculated and fixed the rates of processing and floor taxes on cotton in accordance with the terms of the act.

The United States presented a claim to the respondents as receivers of the Hoosac Mills Corporation for processing and floor taxes on cotton levied under sections 9 and 16 of the act. The receivers recommended that the claim be disallowed. The District Court found the taxes valid and ordered them paid. 3 Upon appeal the Circuit Court of Appeals reversed the order. [Footnote 4] The judgment under review was entered prior to the adoption of the amending act of August 24, 1935,5 and we are therefore concerned only with the original act.

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the accomplishment of the proposed end, and, meanwhile, to aid these farmers during the period required to bring the prices of their crops to the desired level.

The tax plays an indispensable part in the plan of regulation. As stated by the Agricultural Adjustment Administrator, it is 'the heart of the law'; a means of 'accomplishing one or both of two things intended to help farmers attain parity prices and purchasing power.' [Footnote 7] A tax automatically goes into effect for a commodity when the Secretary of Agriculture determines that rental or benefit payments are to be made for reduction of production of that commodity. The tax is to cease when rental or benefit payments cease. The rate is fixed with the purpose of bringing about crop reduction and price raising. It is to equal the difference between the 'current average farm price' and 'fair exchange value.' It may be altered to such amount as will prevent accumulation of surplus stocks. If the Secretary finds the policy of the act will not be promoted by the levy of the tax for a given commodity, he may exempt it. Section 11. The whole revenue from the levy is appropriated in aid of crop control; none of it is made available for general governmental use. The entire agricultural adjustment program embodied in title 1 of the act is to become inoperative when, in the judgment of the President, the national economic emergency ends; and as to any commodity he may terminate the provisions of the law, if he finds them no longer requisite to carrying out the declared policy with re pect to such commodity. Section 13, see 7 U.S.C.A. 613.

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Second. The government asserts that even if the respondents may question the propriety of the appropriation embodied in the statute, their attack must fail because article 1, 8 of the Constitution, authorizes the contemplated expenditure of the funds raised by the tax. This contention presents the great and the controlling question in the case. [Footnote 8] We approach its decision with a sense of our grave responsibility to render judgment in accordance with the principles established for the governance of all three branches of the government.

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tion. The only power it has, if such it may be called, is the power of judgment. This court neither approves nor condemns any legislative policy. Its delicate and difficult office is 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. [Footnote 9]

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pose is the control of agricultural production, a purely local activity, in an effort to raise the prices paid the farmer. Indeed, the government does not attempt to uphold the validity of the act on the basis of the commerce clause, which, for the purpose of the present case, may be put aside as irrelevant.

The clause thought to authorize the legislation, the first, 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. ...' It is not contended that this provision grants power to regulate agricultural production upon the theory that such legislation would promote the general welfare. The government concedes that the phrase 'to provide for the general welfare' qualifies the power 'to lay and collect taxes.' The view that the clause grants power to provide for the general welfare, independently of the taxing power, has never been authoritatively accepted. Mr. Justice Story points out that, if it were adopted, 'it is obvious that under color of the generality of the words, to 'provide for the common defence and general welfare', the government of the United States is, in reality, a government of general and unlimited powers, notwithstanding the subsequent enumeration of specific powers.' [Footnote 11] 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.

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propriate, limited only by the requirement that it shall be exercised to provide for the general welfare of the United States. Each contention has had the support of those whose views are entitled to weight. This court has noticed the question, but has never found it necessary to decide which is the true construction. Mr. Justice Story, in his Commentaries, espouses the Hamiltonian position. [Footnote 12] We shall not review the writings of public men and commentators or discuss the legislative practice. Study of all these leads us to conclude that the reading advocated by Mr. Justice Story is the correct one. While, therefore, the power to tax is not unlimited, its confines are set in the clause which confers it, and not in those of section 8 which bestow and define the legislative powers of the Congress. 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.

But the adoption of the broader construction leaves the power to spend subject to limitations.

As Story says: 'The Constitution was, from its very origin, contemplated to be the frame of a national government, of special and enumerated powers, and not of general and unlimited powers.' [Footnote 13]

Again he says: 'A power to lay taxes for the common defence and general welfare of the United States is not in common sense a general power. It is limited to those objects. It cannot constitutionally transcend them.' [Footnote 14]

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well known Report on Manufactures, states that the purpose must be 'general, and not local.' [Footnote 15] Monroe, an advocate of Hamilton's doctrine, wrote: 'Have Congress a right to raise and appropriate the money to any and to every purpose according to their will and pleasure? They certainly have not.' [Footnote 16] Story says that if the tax be not proposed for the common defense or general welfare, but for other objects wholly extraneous, it would be wholly indefensible upon constitutional principles. [Footnote 17] And he makes it clear that the powers of taxation and appropriation extend only to matters of national, as distinguished from local, welfare.

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We are not now required to ascertain the scope of the phrase 'general welfare of the United States' or to determine whether an appropriation in aid of agriculture falls within it. Wholly apart from that question, another principle embedded in our Constitution prohibits the enforcement of the Agricultural adjustment Act. The act invades the reserved rights of the states. It is a statutory plan to regulate and control agricultural production, a matter beyond the powers delegated to the federal government. The tax, the appropriation of the funds raised, and the direction for their disbursement, are but parts of the plan. They are but means to an unconstitutional end.

From the accepted doctrine that the United States is a government of delegated powers, it follows that those not expressly granted, or reasonably to be implied from such as are conferred, are reserved to the states or to the people. To forestall any suggestion to the contrary, the Tenth Amendment was adopted. [Footnote 18] The same proposition, otherwise stated, is that powers not granted are prohibited. None to regulate agricultural production is given, and therefore legislation by Congress for that purpose is forbidden.

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agree to the proposed regulation. [Footnote 19] The power to confer or withhold unlimited benefits is the power to coerce or destroy. If the cotton grower elects not to accept the benefits, he will receive less for his crops; those who receive payments will be able to undersell him. The result may well to financial ruin. The coercive purpose and intent of the statute is not obscured by the fact that it has not been perfectly successful. It is pointed out that, because there still remained a minority whom the rental and benefit payments were insufficient to induce to surrender their independence of action, the Congress has gone further, and, in the Bankhead Cotton Act, used the taxing power in a more directly minatory fashion to compel submission. This progression only serves more fully to expose the coercive purpose of the so-called tax imposed by the present act. It is clear that the Department of Agriculture has properly described the plan as one to keep a nonco-operating minority in line. This is coercion by economic pressure. The asserted power of choice is illusory.

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concern of any one of the three branches of government, or that it alone can save them from destruction is far more likely, in the long run, 'to obliterate the constituent members' of 'an indestructible union of indestructible states' than the frank recognition that language, even of a constitution, may mean what it says: that the power to tax and spend includes the power to relieve a nationwide economic maladjustment by conditional gifts of money.

Mr. Justice BRANDEIS and Mr. Justice CARDOZO join in this opinion. Footnotes

Footnote 1 May 12, 1933, c. 25, 48 Stat. 31 (see 7 U.S.C.A. 601 et seq.).

Footnote 2 Section 11 (48 Stat. 38) denominates wheat, cotton, field corn, hogs, rice, tobacco, and milk, and its products, 'basic agricultural commodities,' to which the act is to apply. Others have been added by later legislation.

Footnote 3 Franklin Process Co. v. Hoosac Mills Corp. (D.C.) 8 F.Supp. 552.

Footnote 4 Butler et al. v. United States (C.C.A.) 78 F.(2d) 1.

Footnote 5 Public No. 320, 74th Congress, 1st Sess. (7 U.S.C.A. 602 et seq.).

Footnote 6 U.S. Department of Agriculture, Achieving A Balanced Agriculture, p. 38: 'Farmers should not forget that all the processing tax money ends up in their own pockets. Even in those cases where they pay part of the tax, they get it all back. Every dollar collected in processing taxes goes to the farmer in benefit payments.'

U.S. Dept. of Agriculture, The Processing Tax, p. 1: 'Proceeds of processing taxes are passed to farmers as benefit payments.'

Footnote 7 U.S. Department of Agriculture, Agricultural Adjustment, p. 9.

Footnote 8 Other questions were presented and argued by counsel, but we do not consider or decide them. The respondents insist that the act in numerous respects delegates legislative power to the executive contrary to the principles announced in Panama Refining Company v. Ryan, 293 U.S. 388, 55 S.Ct. 241, and A.L.A. Schechter Poultry Corp. v. United States, , 55 S.Ct. 837, 97 A.L.R. 947; that this unlawful delegation is not cured by the amending act of August 24, 1935 (7 U.S.C.A. 602 et seq.); that the exaction is in violation of the due process clause of the Fifth Amendment, since the legislation takes their property for a private use; that the floor tax is a direct tax and therefore void for lack of apportionment amongst the states, as required by article 1, 9; and that the processing tax is wanting in uniformity and so violates article 1, 8, cl. 1, of the Constitution.

Footnote 9 Compare Adkins v. Children's Hospital, 261 U.S. 525, 544, 43 S.Ct. 394, 24 A.L.R. 1238; Commonwealth of Massachusetts v. Mellon, 262 U.S. 447, 488, 43 S.Ct. 597.

Footnote 10 The enactment of protective tariff laws has its basis in the power to regulate foreign commerce. See Board of Trustees of University of Illinois v. United States, 289 U.S. 48, 58, 53 S.Ct. 509.

Footnote 11 Story, Commentaries on the Constitution of the United States (5th Ed.) vol. I, 907.

Footnote 12 Loc. cit. chapter XIV, passim.

Footnote 13 Loc. cit. 909.

Footnote 14 Loc. cit. 922.

Footnote 15 Works, vol. III, p. 250.

Footnote 16 Richardson, Messages and Papers of the Presidents, vol. II, p. 167.

Footnote 17 Loc. cit. p. 673.

Footnote 18 The Tenth Amendment declares: '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.'

Footnote 19 U.S. Dept. of Agriculture, Agricultural Adjustment, p. 9. 'Experience of cooperative associations and other groups has shown that without such Government support, the efforts of the farmers to band together to control the amount of their product sent to market are nearly always brought to nothing. Almost always, under such circumstances, there has been a noncooperating minority, which, refusing to go along with the rest, has stayed on the outside and tried to benefit from the sacrifices the majority has made. ... It is to keep this noncooperating minority in line, or at least prevent it from doing harm to the majority, that the power of the Government has been marshaled behind the adjustment programs.'

[Footnote 1] Whether coercion was the sole or the dominant purpose of the Bankhead Act, or whether the act was designed also for revenue or other legitimate ends, there is no occasion to consider now.