Without the power to tax, a government will have few resources to do anything. It cannot effectively monitor its citizens, protect its population from foreign invaders, or regulate trade because it cannot afford the associated costs. By rejecting the Articles of Confederation – which simply allowed Congress to ask the states for money – the authors effectively passed a tax document – the United States Constitution. The Constitution gave Congress the power to levy and collect taxes. Taxes – specifically, the money they provide – make all other government measures possible. One might think of this in relation to today`s loose confederations such as the United Nations, NATO and the European Union. Without the enforceable power to tax, they are inevitably subject to members` potentially volatile willingness to contribute. For more information on tax power, see this article from the University of Virginia Law Review, this article from the Arizona State Law Journal, and this article from Berkeley Law Review. Fifth, taxes exist in the presence of various constraints of power and personal rights set out in the constitution. While the application of a tax certainly cannot violate the equality clause, the Supreme Court has held more generally that the due process clause does not limit the power to impose. A.
Magnano Co. v Hamilton (1934) (« Except in rare and special cases, the Due Process Clause of the Fifth Amendment does not limit the fiscal power conferred on Congress by the Constitution. Brushaber v. Union Pacific Railroad Co. (1916). And there is no reason to apply another rule against a state in the case of the Fourteenth Amendment. Recognizing the lack of constitutional protection through due process, Congress created restrictions on the « collection procedure » by law. See, Steven J. Willis & Nakku Chung, No Healthcare Penalty? No problem: no due process, 38 hours.
J. Law & Med. 516 (2013). However, these important protections are subject to the whims of future conventions. After the ratification of the Constitution, Alexander Hamilton (representative of the Federalist Party) and James Madison (representative of the Democratic Republican Party) discussed the scope of the tax clause. According to Hamilton, Congress had strong authority to collect (and spend) taxes (and expenditures), regardless of whether the tax (or expenditure) could plausibly be regarded as another enumerated power of Congress, such as regulating interstate commerce or creating and supporting an army. Madison argued that Congress had no independent authority to raise and spend taxes in order to pursue its conception of the general welfare; Instead, Madison argued that the constitutional meaning of the term « public interest » was defined and limited by the specific authorizations in the remainder of section 8. The Supreme Court did not interfere in the long-standing debate about the scope of federal tax and spending powers prior to 1936, in United States v.
Butler (1936), when she sided with Hamilton. Since then, the law has provided that Congress may enforce the tax clause without tying that use to any of its other constitutional powers. The tax clause has perhaps solved the greatest failure of the collective action of the states under the Articles of Confederation: the serial inability of the individual states to adequately finance the national government in the face of the parasitism of the fraternal states. See, for example, Robert D. Cooter and Neil S. Siegel, Collective Action Federalism: A General Theory of Article I, Section 8, 63 Stanford Law Review 115 (2010). This failure caused serious financial problems for the vulnerable young nation and raised serious national security concerns. Where the colonists had insisted that « taxation without representation » was illegitimate, Americans learned under the articles that taxation with representation was essential. Sixth, taxes must be levied « for the common good. » A careful reading of section eight of Article I suggests that the ceiling actually limits purchasing power, not fiscal capacity. Interestingly, in NFIB v. Sebelius (2012), Justice Ginsburg discussed the general welfare restriction that applies to both taxation and spending.
In contrast, Chief Justice Roberts discussed the restriction twice, but only in terms of purchasing power. In any case, this restriction is easy to comply with and therefore largely irrelevant. In the first half of the twentieth century, the Court continued to frighten federal taxes on the grounds that they violated the regulatory powers reserved to states under the Tenth Amendment because Congress did not have separate constitutional authority to regulate the subject matter in question. In 1935, in United States v. Constantine23Footnote296 U.S. 287 (1935). The court struck down a federal excise tax on liquor retailers that violate state law. The Court interpreted the Constitution as prohibiting Congress from collecting the excise tax if the purpose of the tax was to punish revenues rather than increase them.24 at 294. The majority found that Congress exceeded its powers by punishing liquor dealers who violated state laws, since such a provision was reserved for states under the Tenth Amendment.25 at 296. Congress no longer had the power to punish liquor traffickers after the repeal of the Eighteenth Amendment, which established the national ban on alcohol.26FootnoteId.
pp. 293–94. The following year, in United States v. Butler, 27Footnote297 U.S. 1 (1936). The court struck down a tax on agricultural producers that Congress had enacted to raise funds to subsidize certain crops and control the prices of agricultural products. The Court ruled that Congress did not have the power to regulate purely local activities.28FootnoteId. 63–64. control of agricultural production, because the power to regulate local activities was reserved to the states under the Tenth Amendment.29FootnoteId. at 68–69.
The Court has since limited the applicability of these decisions.30FootnoteSee NFIB v. Sebelius, 567 U.S. 519, 572–73 (2012). Finally, even 225 years after the adoption of the constitution, the extent of the power to impose taxes remains unclear in some cases. The Federalist Papers spoke of two broad categories of taxes: direct and indirect, with direct and indirect distribution subject to uniformity. However, the Constitution does not quite say that. Instead, it first grants Congress broad fiscal powers. Thereafter, direct taxes must be divided. Second, it requires that tariffs, duties and excise duties be uniform. The term « indirect » is never used.
This leaves open the question of whether another type of tax is possible, which does not need to be divided or uniform. In 1796, the Supreme Court proposed, but did not rule, that such an « other » tax must be uniform.