U.S. Supreme Court HELVERING v. DAVIS, 301 U.S. 619 (1937)

[Page 301 U.S. 619, 636]

Reserve Account.' Section 201 (42 U.S.C.A. 401). No present appropriation, however, is made to that account. All that the statute does is to authorize appropriations annually thereafter, beginning with the fiscal year which ends June 30, 1937. How large they shall be is not known in advance. The 'amount sufficient as an annual premium' to provide for the required payments is 'to be determined on a reserve basis in accordance with accepted actuarial principles, and based upon such tables of mortality as the Secretary of the Treasury shall from time to time adopt, and upon an interest rate of 3 per centum per annum compounded annually.' Section 201(a), 42 U.S.C.A. 401(a). Not a dollar goes into the Account by force of the challenged act alone, unaided by acts to follow.

Section 202 and later sections (42 U.S.C.A. 402 et seq.) prescribed the form of benefits. The principal type is a monthly pension payable to a person after he has attained the age of 65. This benefit is available only to one who has worked for at least one day in each of at least five separate years since December 31, 1936, who has earned at least $2,000 since that date, and who is not then receiving wages 'with respect to regular employment.' Sections 202(a), (d), 210(c), 42 U.S.C.A. 402(a, d ), 410(c). The benefits are not to begin before January 1, 1942. Section 202(a), 42 U.S.C.A. 402(a). In no event are they to exceed $85 a month. Section 202(b), 42 U.S.C.A. 402(b). They are to be measured (subject to that limit) by a percentage of the wages, the percentage decreasing at stated intervals as the wages become higher. Section 202(a), 42 U.S.C.A. 402(a). In addition to the monthly benefits, provision is made in certain contingencies for 'lump sum payments' of secondary importance. A summary by the Government of the four situations calling for such payments is printed in the margin. [Footnote 1]

[Page 301 U.S. 619, 642]

groups. [Footnote 2] Extensive hearings followed before the House Committee on Ways and Means, and the Senate Committee on Finance. [Footnote 3] A great mass of evidence was brought together supporting the policy which finds expression in the act. Among the relevant facts are these: The number of persons in the United States 65 years of age or over is increasing proportionately as well as absolutely. What is even more important the number of such persons unable to take care of themselves is growing at a threatening pace. More and more our population is becoming urban and industrial instead of rural and agricultural. [Footnote 4] The evidence is impressive that among industrial workers the younger men and women are preferred over the older. [Footnote 5] In times of retrenchment the older are commonly the first to go, and even if retained, their wages are likely to be lowered. The plight of men and women at so low an age as 40 is hard, almost hopeless, when they are driven to seek for reemployment. Statistics are in the brief. A few illustrations will be chosen from many there collected. In 1930, out of 224 American factories investigated, 71, or almost one third, had fixed maximum hiring age limits; in 4 plants the limit was under 40; in 41 it was under 46. In the other 153 plants there were no fixed limits, but in practice few were hired if they were over 50 years of age. [Footnote 6] With the loss of savings inevitable in periods of idleness,

[Page 301 U.S. 619, 643]

the fate of workers over 65, when thrown out of work, is little less than desperate. A recent study of the Social Security Board informs us that 'one-fifth of the aged in the United States were receiving old-age assistance, emergency relief, institutional care, employment under the works program, or some other form of aid from public or private funds; two- fifths to one-half were dependent on friends and relatives, one-eighth had some income from earnings; and possibly one-sixth had some savings or property. Approximately three out of four persons 65 or over were probably dependent wholly or partially on others for support.' [Footnote 7] We summarize in the margin the results of other studies by state and national commissions. [Footnote 8] They point the same way.

[Page 301 U.S. 619, 644]

The problem is plainly national in area and dimensions. Moreover, laws of the separate states cannot deal with it effectively. Congress, at least, had a basis for that belief. States and local governments are often lacking in the resources that are necessary to finance an adequate program of security for the aged. This is brought out with a wealth of illustration in recent studies of the problem. [Footnote 9] Apart from the failure of resources, states and local governments are at times reluctant to increase so heavily the burden of taxation to be borne by their residents for fear of placing themselves in a position of economic disadvantage as compared with neighbors or competitors. We have seen this in our study of the problem of unemployment compensation. Steward Machine Co. v. Davis, supra. A system of old age pensions has special dangers of its own, if put in force in one state and rejected in another. The existence of such a system is a bait to the needy and dependent elsewhere, encouraging them to migrate and seek a haven of repose. Only a power that is national can serve the interests of all.

[Page 301 U.S. 619, 646]

Fifth: The tax is not invalid as a result of its exemptions.

Here again the opinion in Steward Machine Co. v. Davis, supra, says all that need be said.

Sixth: The decree of the Court of Appeals should be reversed and that of the District Court affirmed. Ordered accordingly.

Decree of Court of Appeals reversed, and decree of District Court affirmed.

Mr. Justice McREYNOLDS and Mr. Justice BUTLER are of opinion that the provisions of the Act here challenged are repugnant to the Tenth Amendment, and that the decree of the Circuit Court of Appeals should be affirmed. Footnotes

Footnote 1 (1) If through an administrative error or delay a person who is receiving a monthly pension dies before he receives the correct amount, the amount which should have been paid to him is paid in a lump sum to his estate (section 203(c) 42 U.S.C.A. 403(c)).

(2) If a person who has earned wages in each of at least five separate years since December 31, 1936, and who has earned in that period more than $2,000, dies after attaining the age of 65, but before he has received in monthly pensions an amount equal to 3 1/2 per cent. of the 'wages' paid to him between January 1, 1937, and the time he reaches 65, then there is paid in a lump sum to his estate the difference between said 3 1/2 per cent. and the total amount paid to him during his life as monthly pensions (section 203(b), 42 U.S.C.A. 403(b)).

(3) If a person who has earned wages since December 31, 1936, dies before attaining the age of 65, then there is paid to his estate 3 1/2 per cent. of the 'wages' paid to him between January 1, 1937, and his death ( section 203(a), 42 U.S.C.A. 403(b)).

(4) If a person has, since December 31, 1936, earned wages in employment covered by Title II, but has attained the age of 65 either without working for at least one day in each of 5 separate years since 1936, or without earning at least $2,000 between January 1, 1937, and the time he attains 65, then there is paid to him (or to his estate, section 204(b), 42 U.S.C.A. 404(b)), a lump sum equal to 3 1/2 per cent. of the 'wages' paid to him between January 1, 1937, and the time he attained 65 ( section 204(a), 42 U.S.C.A. 404(a)).

Footnote 2 Report to the President of the Committee on Economic Security, 1935.

Footnote 3 Hearings before the House Committee on Ways and Means on H.R. 4120, 74th Congress, 1st session; Hearings before the Senate Committee on Finance on S. 1130, 74th Congress, 1st Session.

Footnote 4 See Report of the Committee on Recent Social Trends, 1932, vol. 1, pp. 8, 502; Thompson and Whelpton, Population Trends in the United States, pp. 18, 19.

Footnote 5 See the authorities collected at pp. 54-62 of the Government's brief.

Footnote 6 Hiring and Separation Methods in American Industry, 35 Monthly Labor Review, pp. 1005, 1009.

Footnote 7 Economic Insecurity in Old Age (Social Security Board, 1937), p. 15.

Footnote 8 The Senate Committee estimated, when investigating the present act, that over one half of the people in the United States over 65 years of age are dependent upon others for support. Senate Report, No. 628, 74th Congress, 1st Session, p. 4. A similar estimate was made in the Report to the President of the Committee on Economic Security, 1935, p. 24.

A Report of the Pennsylvania Commission on Old Age Pensions made in 1919 (p. 108) after a study of 16,281 persons and interviews with more than 3,500 persons 65 years and over showed two fifths with no income but wages and one fourth supported by children; 1.5 per cent. had savings and 11.8 per cent. had property.

A report on old age pensions by the Massachusetts Commission on Pensions (Senate No. 5, 1925, pp. 41, 52) showed that in 1924 two thirds of those above 65 had, alone or with a spouse, less than $5,000 of property, and one fourth had none. Two thirds of those with less than $5, 000 and income of less than $1,000 were dependent in whole or in part on others for support.

A report of the New York State Commission made in 1930 (Legis. Doc. No. 67, 1930, p. 39) showed a condition of total dependency as to 58 per cent. of those 65 and over, and 62 per cent. of those 70 and over.

The national Government has found in connection with grants to states for old age assistance under another title of the Social Security Act ( Title I (section 1 et seq., 42 U.S.C.A. 301 et seq.)) that in February, 1937, 38.8 per cent. of all persons over 65 in Colorado received public assistance; in Oklahoma the percentage was 44.1, and in Texas 37.5. In 10 states out of 40 with plans approved by the Social Security Board more than 25 per cent. of those over 65 could meet the residence requirements and qualify under a means test and were actually receiving public aid. Economic Insecurity in Old Age, supra, p. 15.

Footnote 9 Economic Insecurity in Old Age, supra, chap. VI, p. 184.

Footnote 10 IV Channing, History of the United States, p. 404 (South Carolina Nullification); 8 Adams, History of the United States (New England Nullification and the Hartford Convention).