Taxing and Spending Clause - PowerPoint Presentation

Slide1

Taxing and Spending ClauseSlide2

Art I, Sec. 8, Clause 1

The Congress shall have 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; but all Duties, Imposts and Excises shall be uniform throughout the United StatesSlide3

Two

t

ypes of

t

ax in original Constitution

Indirect taxes:

Allowed

if uniform

Includes: customs duties, excises or imposts

Direct taxes:

Must be apportioned among

states

on

basis

of population

Includes: head taxes, property taxesSlide4

Springer v. U.S.

(1881)

Challenge to temporary income tax during Civil War

Question was whether this was direct federal tax, rather than properly apportioned among the states

Court unanimously find that prohibition on direct taxes only applied to head taxes & property taxes levied on landSlide5

Pollock v. Farmers Loan

(1895)

1894 – first peacetime income tax, flat 2% on incomes over $4k (top 3% of population)

Pollock sues own bank to prevent them from paying tax

Pollock’s

atty

argues that tax on income from property is first step on road to communal ownership of propertySlide6

Pollock v. Farmers Loan

(1895)

Major argument:

Is tax on income from property the same as a tax on property – the kind of direct tax prohibited by original Constitution?Slide7

16

th

Amendment

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration. Slide8

McCray v. U.S.

(1904)

U.S. taxed colored oleomargarine at higher rate than uncolored (supposedly to prevent resale as butter)

Court upheld tax as deference to Congress’ ability to regulate for purposes such as preventing fraud in commercial transactionsSlide9

Bailey v. Drexel Furniture

(1922)

Following Sup Ct’s decision in

Hammer v.

Dagenhart

, Congress passes tax on all items made with child labor passing in interstate commerce

Tax seen as serving same purpose as in

McCray

, equalizing costs, cutting incentive to hire childrenSlide10

Bailey v. Drexel Furniture

(1922)

Court strikes down Child Labor Tax Act, saying that tax goes beyond “incidental restraint and regulation” and so has a “prohibitory and regulatory effect”Slide11

Steward Machine v. Davis

(1937)

Employers of 8 or more required to pay federal unemployment insurance

Taxes paid to state unemployment plans credited so long as state plans met federal standardsSlide12

Steward Machine v. Davis

(1937)

Cardozo notes, from 1929-1936:

Average of 10 million unemployed

Peak of > 16 million unemployed

States ran out of relief dollarsSlide13

Steward Machine v. Davis

(1937)

“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.”

Citing

Sonzinsky

v. U.S.

(1937) (firearms tax case)Slide14

Helvering

v. Davis

(1937)

Companion case to

Steward Machine

, concerned old age and survivors benefits portions of Social Security

Key challenge: states had traditionally provided such welfare benefits

Cardozo notes impossibility of such during “national calamity” of Great DepressionSlide15

U.S. v.

Kahriger

(1953)

Gamblers’ Occupational Tax Act of 1951 requires registration as a professional gambler

Kahriger

argues that gambling properly regulated as moral issue by states and registration violates 5

th

Amendment right against self-incriminationSlide16

U.S. v.

Kahriger

(1953)

From majority opinion:

“the instant tax has a regulatory effect. But regardless of its regulatory effect, the wagering tax produces revenue.”Slide17

South Dakota v. Dole

(1987)

21

st

Amendment gives states power to regulate alcohol sales

Different minimum ages in states gave 18-20 year olds reasons to cross state lines to find alcohol

Congress conditions highway funding on state adoption of uniform 21 year old minimum drinking ageSlide18

South Dakota v. Dole

(1987)

Rehnquist defines four conditions:

Spending must be in “general Welfare” (w/ usual deference to Congress one assumes)

Conditions for receipt must be “unambiguous” and clearly stated so states can “exercise their choice knowingly)Slide19

South Dakota v. Dole

(1987)

Rehnquist defines four conditions:

3. Related “to the federal interest in particular national projects or programs”

4. No other constitutional provision independently bars such conditional grantsSlide20

Should We Tax Fattening Foods?: A Quick Argument For Taxing High Fructose Corn SyrupSlide21

Obesity Rates in U.S. - 1990Slide22

Obesity Rates in U.S. - 2009Slide23
Slide24

Estimated diabetes costs in the United States in 2007

Total Cost:

$174 billion

Direct medical costs:

$116 billion

Indirect costs:

$58 billion

(disability, work loss, premature mortality)

Source:

Centers for Disease Control