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57 S.Ct.

883 Page
301 U.S. 548, 57 S.Ct. 883, 109 A.L.R. 1293, 81 L.Ed. 1279, 19 A.F.T.R. 510, 1937-1 C.B. 444
(Cite as: 301 U.S. 548, 57 S.Ct. 883)

Supreme Court of the United States


CHAS. C. STEWARD MACH. CO. *573 Mr. Justice CARDOZO delivered
v. the opinion of the Court.
DAVIS.
No. 837. The validity of the tax imposed by the
Social Security Act (42 U.S.C.A. ss 301-
Argued April 8-9, 1937. 1305) on employers of eight or more is
Decided May 24, 1937. here to be determined.

On Writ of Certiorari to the United States Petitioner, an Alabama corporation, paid


Circuit Court of Appeals for the Fifth a tax in accordance with the statute, filed
Circuit. a claim for refund with the Commissioner
of Internal Revenue, and sued to recover
Suit by the Charles C. Steward Machine the payment ($46.14), asserting a conflict
Company against Harwell G. Davis, between the statute and the Constitution
individually and as Collector of Internal of the United States. Upon demurrer the
Revenue for the District of Alabama. A District Court gave judgment for the
judgment dismissing the suit was defendant dismissing the complaint, and
affirmed by the Circuit Court of Appeals the Circuit Court of Appeals for the Fifth
( 89 F.(2d) 207), and plaintiff brings Circuit affirmed. 89 F.(2d) 207. The
certiorari. decision is in accord with judgments of
the Supreme Judicial Court of
Affirmed. Massachusetts (Howes Brothers Co. v.
Massachusetts Unemployment
Mr. Justice SUTHERLAND and Mr. Compensation Commission, December
Justice VAN DEVANTER dissenting in 30, 1936, 5 N.E.(2d) 720), the Supreme
part. Court of California ( Gillum v. Johnson,
November 25, 1936, 62 P.(2d) 1037), and
Mr. Justice McREYNOLDS and Mr. the Supreme Court of Alabama ( Beeland
Justice BUTLER dissenting. Wholesale Co. v. Kaufman, March 18,
1937, 174 So. 516). It is in conflict with a
[headnotes omitted] judgment of the Circuit Court of Appeals
for the First Circuit, from which one
**884 *551 Messrs. William Logan judge dissented. Davis v. Boston &
Martin, of Birmingham, Ala., Neil P. Maine R.R. Co., April 14, 1937, 89 F. (2d)
Sterne, of Anniston, Ala., and Walter 368. An important question of
Bouldin, of Birmingham, Ala., for constitutional law being involved, we
petitioner. granted certiorari. 300 U.S. 652, 57 S.Ct.
673, 81 L.Ed. 863.
Homer S. Cummings, Atty. Gen., *553
Charles E. Wyzanski, Jr., Sp. Asst. Atty. *574 The Social Security Act (Act of
Gen., and Robert H. Jackson, Asst. Atty. August 14, 1935, c. 531, 49 Stat. 620, 42
Gen., for respondent. U.S.C., c. 7 (Supp.II), 42 U.S.C.A. ss 301-

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301 U.S. 548, 57 S.Ct. 883, 109 A.L.R. 1293, 81 L.Ed. 1279, 19 A.F.T.R. 510, 1937-1 C.B. 444
(Cite as: 301 U.S. 548, 57 S.Ct. 883)

1305) is divided into eleven separate titles, shall not exceed 90 per centum of the tax
of which only titles IX and III are so against which it is credited, and provided
related to this case as to stand in need of also that the state law shall have been
summary. certified to the Secretary of the Treasury
by the Social Security Board as satisfying
The caption of title IX is Tax on certain minimum criteria. Section 902.
Employers of Eight or More. Every The provisions of section 903 (42 U.S.C.A.
employer (with stated exceptions) is to s 1103) defining those criteria are stated
pay for each calendar year an excise tax, in the *575 margin.FN1 Some of the
with respect to having individuals in his conditions thus attached to the allowance
employ, the tax to be measured by of a credit are designed to give assurance
prescribed percentages of the total wages that the state unemployment
payable by the employer during the compensation law shall be one in
calendar year with respect to such substance as well as name. Others are
employment. Section 901, 42 U.S.C.A. s designed to give assurance that the
1101. One is not, however, an employer contributions shall be protected against
within the meaning of the act unless he loss after payment to the state. To this last
employs eight persons or more. Section end there *576 are provisions that before
907(a), 42 U.S.C.A. s 1107(a). There are a state law shall have the approval of the
also other limitations of minor Board it must direct that the
importance. The term employment too contributions to the state fund be paid
has its special definition, excluding over immediately to the Secretary of the
agricultural labor, domestic service in a Treasury to the credit of the
private **885 home, and some other Unemployment Trust Fund. Section 904
smaller classes. Section 907(c), 42 (42 U.S.C.A. s 1104) establishing this fund
U.S.C.A. s 1107(c). The tax begins with is quoted below. FN2 For the moment it is
the year 1936, and is payable for the first **886 enough to say that the fund is to be
time on January 31, 1937. During the held by the Secretary of the Treasury,
calendar year 1936 the rate is to be 1 per who is to invest in government securities
cent., during 1937 2 per cent., and 3 per any portion not required in his judgment
cent. thereafter. The proceeds, when to meet current withdrawals. He is
collected, go into the Treasury of the authorized and directed to pay out of the
United States like internal revenue fund to any competent state agency such
collections generally. Section 905(a), 42 sums as it may duly requisition from the
U.S.C.A. s 1105(a). They are not amount standing to its credit. Section
earmarked in any way. In certain 904(f), 42 U.S.C.A. s 1104(f).
circumstances, however, credits are
allowable. Section 902, 42 U.S.C.A. s 1102. FN1. Sec. 903. (a) The Social
If the taxpayer has made contributions to Security Board shall approve any
an unemployment fund under a state law, State law submitted to it, within
he may credit such contributions against thirty days of such submission,
the federal tax, provided, however, that which it finds provides that-
the total credit allowed to any taxpayer

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(1) All compensation is to be paid to join a company union or to


through public employment offices resign from or refrain from joining
in the State or such other agencies any bona fide labor organization;
as the Board may approve;
(6) All the rights, privileges, or
(2) No compensation shall be immunities conferred by such law
payable with respect to any day of or by acts done pursuant thereto
unemployment occurring within shall exist subject to the power of
two years after the first day of the the legislature to amend or repeal
first period with respect to which such law at any time.
contributions are required;
The Board shall, upon approving
(3) All money received in the such law, notify the Governor of
unemployment fund shall the State of its approval.
immediately upon such receipt be
paid over to the Secretary of the (b) On December 31 in each
Treasury to the credit of the taxable year the Board shall
Unemployment Trust Fund certify to the Secretary of the
established by Section 904 (section Treasury each State whose law it
1104 of this chapter); has previously approved, except
that it shall not certify any State
(4) All money withdrawn from the which, after reasonable notice and
Unemployment Trust Fund by the opportunity for hearing to the
State agency shall be used solely in State agency, the Board finds has
the payment of compensation, changed its law so that it no longer
exclusive of expenses of contains the provisions specified in
administration; subsection (a) or has with respect
to such taxable year failed to
(5) Compensation shall not be comply substantially with any such
denied in such State to any provision.
otherwise eligible individual for
refusing to accept new work under (c) If, at any time during the
any of the following conditions: taxable year, the Board has reason
(A) If the position offered is vacant to believe that a State whose law it
due directly to a strike, lockout, or has previously approved, may not
other labor dispute; (B) if the be certified under subsection (b), it
wages, hours, or other conditions shall promptly so notify the
of the work offered are Governor of such State.
substantially less favorable to the
individual than those prevailing FN2. Sec. 904. (a) There is hereby
for similar work in the locality; (C) established in the Treasury of the
if as a condition of being employed United States a trust fund to be
the individual would be required known as the Unemployment

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(Cite as: 301 U.S. 548, 57 S.Ct. 883)

Trust Fund, hereinafter (in this bearing obligations of the United


title) called the Fund. The States then forming part of the
Secretary of the Treasury is public debt; except that where
authorized and directed to receive such average rate is not a multiple
and hold in the Fund all moneys or one-eighth of 1 per centum, the
deposited therein by a State rate of interest of such special
agency from a State obligations shall be the multiple of
unemployment fund. Such deposit one-eighth of 1 per centum next
may be made directly with the lower than such average rate.
Secretary of the Treasury or with Obligations other than such special
any Federal reserve bank or obligations may be acquired for
member bank of the Federal the Fund only on such terms as to
Reserve System designated by him provide an investment yield not
for such purpose. less than the yield which would be
required in the case of special
(b) It shall be the duty of the obligations if issued to the Fund
Secretary of the Treasury to invest upon the date of such acquisition.
such portion of the Fund as is not,
in his judgment, required to meet (c) Any obligations acquired by the
current withdrawals. Such Fund (except special obligations
investment may be made only in issued exclusively to the Fund)
interest bearing obligations of the may be sold at the market price,
United States or in obligations and such special obligations may
guaranteed as to both principal be redeemed at par plus accrued
and interest by the United States. interest.
For such purpose such obligations
may be acquired (1) on original (d) The interest on, and the
issue at par, or (2) by purchase of proceeds from the sale or
outstanding obligations at the redemption of, any obligations
market price. The purposes for held in the Fund shall be credited
which obligations of the United to and form a part of the Fund.
States may be issued under the
Second Liberty Bond Act, as (e) The Fund shall be invested as a
amended (section 752 of Title 31), single fund, but the Secretary of
are hereby extended to authorize the Treasury shall maintain a
the issuance at par of special separate book account for each
obligations exclusively to the Fund. State agency and shall credit
Such special obligations shall bear quarterly on March 31, June 30,
interest at a rate equal to the September 30, and December 31,
average rate of interest, computed of each year, to each account, on
as of the end of the calendar the basis of the average daily
month next preceding the date of balance of such account, a
such issue, borne by all interest- proportionate part of the earnings

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of the Fund for the quarter ending propriety of a payment to the Secretary of
on such date. the Treasury (section 303, 42 U.S.C.A. s
503). They are designed to give assurance
(f) The Secretary of the Treasury is to the federal government that the
authorized and directed to pay out moneys granted by it will not be expended
of the Fund to any State agency for purposes alien to the grant, and will
such amount as it may duly be used in the administration of genuine
requisition, not exceeding the unemployment compensation laws.
amount standing to the account of
such State agency at the time of The assault on the statute proceeds on an
such payment. extended front. Its assailants take the ground
that the tax is not an excise; that **887 it is
*577 Title III, which is also challenged as not uniform throughout the United States as
invalid, has the caption Grants to States excises are required to be; that its exceptions
for Unemployment Compensation are so many and arbitrary as to violate the
Administration. Under this title, certain Fifth Amendment; that its purpose was not
sums of money are authorized to be revenue, but an unlawful invasion of the
appropriated for the purpose of assisting reserved powers of the states; and that the
the states in the administration of their states in submitting to it have yielded to
unemployment compensation laws, the coercion and have abandoned governmental
maximum for the fiscal year ending June functions which they are not permitted to
30, 1936, to be $4,000,000, and surrender.
$49,000,000 for each fiscal year thereafter.
Section 301, 42 U.S.C.A. s 501. No present The objections will be considered seriatim
appropriation is made to the extent of a with such further explanation as may be
single dollar. All that the title does is to necessary to make their meaning clear.
authorize future appropriations. Actually
only $2,250,000 of the $4,000,000 [1][2][3][4][5][6][7] First: The tax, which is
authorized was appropriated for 1936 described in the statute as an excise, is laid
(Act of Feb. 11, *578 1936, c. 49, 49 Stat. with uniformity throughout the United
1109, 1113) and only $29,000,000 of the States as a duty, an impost, or an excise
$49,000,000 authorized for the following upon the relation of employment.
year (Act of June 22, 1936, c. 689, 49 Stat.
1597, 1605). The appropriations when 1. We are told that the relation of
made were not specifically out of the employment is one so essential to the
proceeds of the employment tax, but out pursuit of happiness that it may not be
of any moneys in the Treasury. Other burdened with a tax. Appeal is made to
sections of the title prescribe the method history. From the precedents of colonial
by which the payments are to be made to days, we are supplied with *579
the state (section 302, 42 U.S.C.A. s 502) illustrations of excises common in the
and also certain conditions to be colonies. They are said to have been
established to the satisfaction of the Social bound up with the enjoyment of
Security Board before certifying the particular commodities. Appeal is also

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made to principle or the analysis of a distinction that a tax upon the use of
concepts. An excise, we are told, imports a male servants was thought of as a tax
tax upon a privilege; employment, it is upon a luxury. Davis v. Boston & Maine
said, is a right, not a privilege, from R.R. Co., supra. It did not touch
which it follows that employment is not employments in husbandry or business.
subject to an excise. Neither the one This is to throw over the argument that
appeal nor the other leads to the desired historically an excise is a tax upon the
goal. enjoyment of commodities. But the
attempted distinction, whatever may be
As to the argument from history: thought of its validity, is inapplicable to a
Doubtless there were many excises in statute of Virginia passed in 1780. There a
colonial days and later that were tax of 3 pounds, 6 shillings, and 8 pence
associated, more or less intimately, with was to be paid for every male tithable
the enjoyment or the use of property. This above the age of twenty-one years (with
would not prove, even if no others were stated exceptions), and a like tax for
then known, that the forms then accepted every white servant whatsoever, except
were not subject to enlargement. Cf. apprentices under the age of twenty one
Pensacola Teleg. Co. v. Western Union years. 10 Hening's Statutes of Virginia, p.
Telegraph Co., 96 U.S. 1, 9, 24 L.Ed. 708; 244. Our colonial forbears knew more
In re Debs, 158 U.S. 564, 591, 15 S.Ct. about ways of taxing than some of their
900, 39 L.Ed. 1092; South Carolina v. descendants seem to be willing to concede.
FN5
United States, 199 U.S. 437, 448, 449, 26
S.Ct. 110, 50 L.Ed. 261, 4 Ann.Cas. 737.
But in truth other excises were known, FN3 The list of services is
and known since early times. Thus in comprehensive. It included:
1695 (6 & 7 Wm. III, c. 6), Parliament Maitre d'Hotel, House-steward,
passed an act which granted to His Master of the House, Groom of the
Majesty certain Rates and Duties upon Chamber, Valet de Chambre,
Marriages, Births and Burials, all for the Butler, Under-butler, Clerk of the
purpose of carrying on the War against Kitchen, Confectioner, Cook,
France with Vigour. See Opinion of the House-porter, Footman, Running-
Justices, 196 Mass. 603, 609, 85 N.E. 545, footman, Coachman, Groom,
547. No commodity was affected there. Postillion, Stable-boy, and the
The industry of counsel has supplied us respective Helpers in the Stables of
with an apter illustration where the tax such Coachman, Groom, or
was not different in substance from the Postillion, or in the Capacity of
one now challenged as invalid. In 1777, Gardener (not being a Day-
before our Constitutional Convention, labourer), Park-keeper, Game-
Parliament laid upon employers an keeper, Huntsman, Whipper-in. * *
annual duty of 21 shillings for every *
male Servant employed in stated forms of
work.FN3 *580 Revenue Act of 1777, 17 FN4 The statute, amended from
George III, c. 39.FN4 The point is made as time to time, but with its basic

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structure unaffected, is on the privileges invested with a single name.


statute books today. Act of 1803, Henneford v. Silas Mason Co., Inc.
43 George III, c. 161; Act of 1812, (March 29, 1937) 300 U.S. 577, 57 S.Ct.
52 George III, c. 93; Act of 1853, 524, 527, 81 L.Ed. 814. A state is at
16 & 17 Vict., c. 90; Act of 1869, 32 liberty, if it pleases, to tax them all
& 33 Vict., c. 14. 24 Halsbury's collectively, or to separate the faggots and
Laws of England, 1st ed., p. 692 et lay the charge distributively. Id.
seq. Employment is a business relation, if not
itself a business. It is a relation without
FN5 See, also, the following laws which business could seldom be carried
imposing occupation taxes: 12 on effectively. The power to tax the
Hening's Statutes of Virginia, p. activities and relations that constitute a
285, Act of 1786; Chandler, The calling considered as a unit is the power
Colonial Records of Georgia, vol. to tax any of them. The whole includes
19, Part 2, p. 88, Act of 1778; 1 the parts. Nashville, C. & St. L. Ry. Co.
Potter, Taylor and Yancey, North v. Wallace, 288 U.S. 249, 267, 268, 53 S.Ct.
Carolina Revised Laws, p. 501, Act 345, 349, 350, 77 L.Ed. 730, 87 A.L.R.
of 1784. 1191.

The historical prop failing, the prop or FN6 The cases are brought
fancied prop of principle remains. We together by Prof. John MacArthur
learn **888 that employment for lawful Maguire in an essay, Taxing the
gain is a natural or inherent or Exercise of National Rights'
inalienable right, and not a privilege at (Harvard Legal Essays, 1934, pp.
all. But natural rights, so called, are as 273, 322).
much subject to taxation as rights of less
importance.FN6 An excise is not limited to The Massachusetts decisions must
vocations or activities *581 that may be be read in the light of the
prohibited altogether. It is not limited to particular definitions and
those that are the outcome of a franchise. restrictions of the Massachusetts
It extends to vocations or activities Constitution. Opinions of the
pursued as of common right. What the Justices, 282 Mass. 619, 622, 186
individual does in the operation of a N.E. 490; Id., 266 Mass. 590, 593,
business is amenable to taxation just as 165 N.E. 904, 63 A.L.R. 952. And
much as what he owns, at all events if the see Howes Brothers Co. v.
classification is not tyrannical or Massachusetts Unemployment
arbitrary. Business is as legitimate an Compensation Commission, supra,
object of the taxing power as property. 5 N.E.(2d) 720, at pages 730, 731.
City of Newton v. Atchison, 31 Kan. 151,
154, 1 P. 288, 290, 47 Am.Rep. 486 (per The subject-matter of taxation open to the
Brewer, J.). Indeed, ownership itself, as power of the Congress is as comprehensive
we had occasion to point out the other as that open to the power of the states,
day, is only a bundle of rights and though the method of apportionment may at

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times be different. The Congress shall United States, 192 U.S. 363, 370, 24 S.Ct.
have Power to lay and collect Taxes, 305, 306, 48 L.Ed. 481, it was said of the
Duties, Imposts and Excises. Article 1, s words duties, imposts, and excises' that
8. If the tax is a direct one, it shall be they were used comprehensively to cover
apportioned according to the census or customs and excise duties imposed on
enumeration. If it is a duty, impost, or importation, consumption, manufacture,
excise, it shall be uniform throughout the and sale of certain commodities,
United States. Together, these classes privileges, particular business
include every form of tax appropriate to transactions, vocations, occupations, and
sovereignty. Cf. Burnet v. Brooks, 288 the like. At times taxpayers have
U.S. 378, 403, 405, 53 S.Ct. 457, 464, 465, contended that the Congress is without
77 L.Ed. 844, 86 A.L.R. 747; Brushaber v. power to lay an excise on the enjoyment
Union Pacific R.R. Co., 240 U.S. 1, 12, 36 of a privilege created by state law. The
S.Ct. 236, 60 L.Ed. 493, L.R.A.1917D, contention has been put aside as
414, Ann.Cas.1917B, 713. Whether the tax baseless. Congress may tax the
is to be *582 classified as an excise is in transmission of property by inheritance
truth not of critical importance. If not or will, though the states and not
that, it is an impost ( Pollock v. Farmers' Congress have created the privilege of
Loan & Trust Co., 158 U.S. 601, 622, 625, succession. **889Knowlton v. Moore,
15 S.Ct. 912, 39 L.Ed. 1108; Pacific supra, 178 U.S. 41, at page 58, 20 S.Ct.
Insurance Co. v. Soule, 7 Wall. 433, 445, 747, 44 L.Ed. 969. Congress may tax the
19 L.Ed. 95), or a duty ( Veazie Bank v. enjoyment of a corporate franchise,
Fenno, 8 Wall. 533, 546, 547, 19 L.Ed. though a state and not Congress has
482; Pollock v. Farmers' Loan & Trust brought the franchise into being. Flint v.
Co., 157 U.S. 429, 570, 15 S.Ct. 673, 39 Stone Tracy Co., 220 U.S. 107, 108, 155,
L.Ed. 759; Knowlton v. Moore, 178 U.S. 31 S.Ct. 342, 55 L.Ed. 389,
41, 46, 20 S.Ct. 747, 44 L.Ed. 969). A Ann.Cas.1912B, 1312. The statute books of
capitation or other direct tax it certainly the states are strewn with illustrations of
is not. Although there have been, from taxes laid on *583 occupations pursued of
time to time, intimations that there might common right.FN7 We find no basis for a
be some tax which was not a direct tax, holding that the power in that regard which
nor included under the words duties, belongs by accepted practice to the
imposts, and excises, such a tax, for more Legislatures of the states, has been denied
than 100 years of national existence, has by the Constitution to the Congress of the
as yet remained undiscovered, nation.
notwithstanding the stress of particular
circumstances has invited thorough FN7 Alabama General Acts, 1935,
investigation into sources of revenue.' No. 194, art. 13, s 348 et seq. (flat
Pollock v. Farmers' Loan & Trust Co., license tax on occupations);
157 U.S. 429, 557, 15 S.Ct. 673, 680, 39 Arizona Revised Code,
L.Ed. 759. There is no departure from Supplement (1936) s 3138a et seq.
that thought in later cases, but rather a (general gross receipts tax);
new emphasis of it. Thus, in Thomas v. Connecticut General Statutes,

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Supplement (1935) ss 457c, 458c LaBelle Iron Works v. United States, 256
(gross receipts tax on U.S. 377, 392, 41 S.Ct. 528, 532, 65 L.Ed.
unincorporated businesses); 998; Poe v. Seaborn, 282 U.S. 101, 117, 51
Revised Code of Delaware (1935) S.Ct. 58, 61, 75 L.Ed. 239; Wright v.
ss 192-197 (flat license tax on Vinton Branch of Mountain Trust Bank
occupations); Compiled Laws of (March 29, 1937) 300 U.S. 440, 57 S.Ct.
Florida, Permanent Supplement 556, 81 L.Ed. 736. The rule of liability
(1936) Vol. 1, s 1279 (1) et seq. (flat shall be alike in all parts of the United
license tax on occupations); States. Florida v. Mellon, 273 U.S. 12, 17,
Georgia Laws, 1935, p. 11 (flat 47 S.Ct. 265, 266, 71 L.Ed. 511.
license tax on occupations);
Indiana Statutes Ann. (1933) s 64- [9] Second: The excise is not invalid under
2601 et seq. (general gross receipts the provisions of the Fifth Amendment by
tax); Louisiana Laws, 3rd Extra force of its exemptions.
Session, 1934, Act No. 15, 1st Extra
Session, 1935, Acts Nos. 5, 6 *584 The statute does not apply, as we have
(general gross receipts tax); seen, to employers of less then eight. It does
Mississippi Laws, 1934, c. 119 not apply to agricultural labor, or domestic
(general gross receipts tax); New service in a private home or to some other
Mexico Laws, 1935, c. 73 (general classes of less importance. Petitioner
gross receipts tax); South Dakota contends that the effect of these restrictions
Laws, 1933, c. 184 (general gross is an arbitrary discrimination vitiating the
receipts tax, expired June 30, tax.
1935); Washington Laws, 1935, c.
180, title 2, p. 709 (general gross The Fifth Amendment unlike the Fourteenth
receipts tax); West Virginia Code, has no equal protection clause. LaBelle
Supplement (1935) s 960 (general Iron Works v. United States, supra;
gross receipts tax). Brushaber v. Union Pacific R.R. Co., supra,
240 U.S. 1, at page 24, 36 S.Ct. 236, 60
[8] 2. The tax being an excise, its L.Ed. 493, L.R.A.1917D, 414,
imposition must conform to the canon of Ann.Cas.1917B, 713. But even the states,
uniformity. There has been no departure though subject to such a clause, are not
from this requirement. According to the confined to a formula of rigid uniformity in
settled doctrine, the uniformity exacted is framing measures of taxation. Swiss Oil
geographical, not intrinsic. Knowlton v. Corporation v. Shanks, 273 U.S. 407, 413,
Moore, supra, 178 U.S. 41, at page 83, 20 47 S.Ct. 393, 395, 71 L.Ed. 709. They may
S.Ct. 747, 44 L.Ed. 969; Flint v. Stone tax some kinds of property at one rate, and
Tracy Co., supra, 220 U.S. 107, at page others at another, and exempt others
158, 31 S.Ct. 342, 55 L.Ed. 389, altogether. Bell's Gap R.R. Co. v.
Ann.Cas.1912B, 1312; Billings v. United Pennsylvania, 134 U.S. 232, 10 S.Ct. 533,
States, 232 U.S. 261, 282, 34 S.Ct. 421, 58 33 L.Ed. 892; Stebbins v. Riley, 268 U.S.
L.Ed. 596; Stellwagen v. Clum, 245 U.S. 137, 142, 45 S.Ct. 424, 426, 69 L.Ed. 884,
605, 613, 38 S.Ct. 215, 62 L.Ed. 507; 44 A.L.R. 1454; Ohio Oil Co. v. Conway,

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281 U.S. 146, 150, 50 S.Ct. 310, 74 L.Ed. useless to repeat the argument. The act of
775. They may lay an excise on the Congress is therefore valid, so far at least as
operations of a particular kind of business, its system of exemptions is concerned, and
and exempt some other kind of business this though we assume that discrimination, if
closely akin thereto. Quong Wing v. gross enough, is equivalent to confiscation
Kirkendall, 223 U.S. 59, 62, 32 S.Ct. 192, and subject under the Fifth Amendment to
56 L.Ed. 350; American Sugar Refining Co. challenge and annulment.
v. Louisiana, 179 U.S. 89, 94, 21 S.Ct. 43,
45 L.Ed. 102; Armour Packing Co. v. Lacy, [10][11] Third: The excise is not void as
200 U.S. 226, 235, 26 S.Ct. 232, 50 L.Ed. involving the coercion of the states in
451; Brown-Forman Co. v. Kentucky, 217 contravention of the Tenth Amendment or of
U.S. 563, 573, 30 S.Ct. 578, 54 L.Ed. 883; restrictions implicit in our federal form of
Heisler v. Thomas Colliery Co., 260 U.S. government.
245, 255, 43 S.Ct. 83, 84, 67 L.Ed. 237;
State Board of Tax Com'rs v. Jackson, 283 The proceeds of the excise when collected
U.S. 527, 537, 538, 51 S.Ct. 540, 543, 75 are paid into the Treasury at Washington,
L.Ed. 1248, 73 A.L.R. 1464, 75 A.L.R. and thereafter are subject to appropriation
1536. If this latitude of judgment is lawful like public moneys generally. Cincinnati
for the states, it is lawful, a fortiori, in Soap Co. v. United States (May 3, 1937) 301
legislation by the Congress, which is subject U.S. 308, 57 S.Ct. 764, 81 L.Ed. 1122. No
to restraints less narrow and confining. presumption can be indulged that they will
Quong Wing v. Kirkendall, supra. be misapplied or wasted.FN8 Even if they
were collected in the hope or expectation
**890 The classifications and exemptions that some other and collateral good would
directed by the statute now in controversy be furthered as an incident, that without
have support in considerations of policy and more would not make the act invalid.
practical convenience that cannot be Sonzinsky v. United States (March 29, 1937)
condemned as arbitrary. The classifications 300 U.S. 506, 57 S.Ct. 554, 555, 81 L.Ed.
and exemptions would therefore be upheld if 772. This indeed is hardly questioned. The
they had been adopted by a state and the case for the petitioner is built on the
provisions of the Fourteenth Amendment contention that here an ulterior aim is
were invoked to annul them. This is held in wrought into the very structure of the act,
two cases *585 passed upon today in which and what is *586 even more important that
precisely the same provisions were the the aim is not only ulterior, but essentially
subject of attack, the provisions being unlawful. In particular, the 90 per cent.
contained in the Unemployment credit is relied upon as supporting that
Compensation Law of the state of Alabama conclusion. But before the statute succumbs
(Gen.Acts Ala.1935, p. 950, as amended). to an assault upon these lines, two
Carmichael v. Southern Coal & Coke Co. propositions must be made out by the
(Carmichael v. Gulf States Paper assailant. Cincinnati Soap Co. v. United
Corporation), 301 U.S. 495, 57 S.Ct. 868, 81 States, supra. There must be a showing in
L.Ed. 1245. The opinion rendered in those the first place that separated from the credit
cases covers the ground fully. It would be the revenue provisions are incapable of

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standing by themselves. There must be a to dependents. Accordingly the roll of the


showing in the second place that the tax and unemployed, itself formidable enough, was
the credit in combination are weapons of only a partial roll of the destitute or needy.
coercion, destroying or impairing the The fact developed quickly that the states
autonomy of the states. The truth of each were unable to give the requisite relief. The
proposition being essential to the success of problem had become national in area and
the assault, we pass for convenience to a dimensions. There was need of help from
consideration of the second, without pausing the nation if the people were not to starve. It
to inquire whether there has been a is too late today for the argument to be heard
demonstration of the first. with tolerance that in a crisis so extreme the
use of the moneys of the nation to relieve
FN8 The total estimated receipts the unemployed *587 and their dependents
without taking into account the 90 is a use for any purpose **891 narrower
per cent. deduction, range from than the promotion of the general welfare.
$225,000,000 in the first year to over Cf. United States v. Butler, 297 U.S. 1, 65,
$900,000,000 seven years later. Even 66, 56 S.Ct. 312, 319, 80 L.Ed. 477, 102
if the maximum credits are available A.L.R. 914; Helvering v. Davis, 301 U.S.
to taxpayers in all states, the 619, 672, 57 S.Ct. 904, 81 L.Ed. 1307,
maximum estimated receipts from decided herewith. The nation responded to
Title IX will range between the call of the distressed. Between January
$22,000,000, at one extreme, to 1, 1933, and July 1, 1936, the states
$90,000,000 at the other. If some of (according to statistics submitted by the
the states hold out in their government) incurred obligations of
unwillingness to pass statutes of their $689,291,802 for emergency relief; local
own, the receipts will be still larger. subdivisions an additional $775,675,366. In
the same period the obligations for
To draw the line intelligently between duress emergency relief incurred by the national
and inducement, there is need to remind government were $2,929,307,125, or twice
ourselves of facts as to the problem of the obligations of states and local agencies
unemployment that are now matters of combined. According to the President's
common knowledge. West Coast Hotel Co. budget message for the fiscal year 1938, the
v. Parrish (March 29, 1937) 300 U.S. 379, national government expended for public
57 S.Ct. 578, 81 L.Ed. 703. The relevant works and unemployment relief for the three
statistics are gathered in the brief of counsel fiscal years 1934, 1935, and 1936, the
for the government. Of the many available stupendous total of $8,681,000,000. The
figures a few only will be mentioned. parens patriae has many reasons-fiscal and
During the years 1929 to 1936, when the economic as well as social and moral-for
country was passing through a cyclical planning to mitigate disasters that bring
depression, the number of the unemployed these burdens in their train.
mounted to unprecedented heights. Often the
average was more than 10 million; at times a In the presence of this urgent need for some
peak was attained of 16 million or more. remedial expedient, the question is to be
Disaster to the breadwinner meant disaster answered whether the expedient adopted has

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overlept the bounds of power. The assailants the measure of their capacity, a
of the statute say that its dominant end and disproportionate burden, and a mountainous
aim is to drive the state Legislatures under one, was laid upon the resources of the
the whip of economic pressure into the government of the nation.
enactment of unemployment compensation
laws at the bidding of the central FN9 The attitude of Massachusetts is
government. Supporters of the statute say significant. Her act became a law
that its operation is not constraint, but the August 12, 1935, two days before the
creation of a larger freedom, the states and federal act. Even so, she prescribed
the nation joining in a co-operative endeavor that its provisions should not become
to avert a common evil. Before Congress operative unless the federal bill
acted, unemployment compensation became a law, or unless eleven of the
insurance was still, for the most part, a following states (Alabama,
project and no more. Wisconsin was the Connecticut, Delaware, Georgia,
pioneer. Her statute was adopted in 1931. At Illinois, Indiana, Iowa, Maine,
times bills for such insurance were Maryland, Michigan, Minnesota,
introduced elsewhere, but they did not reach Missouri, New Hampshire, New
the stage of law. In 1935, four states Jersey, New York, North Carolina,
(California, Massachusetts, New Hampshire, Ohio, Rhode Island, South Carolina,
and New York) passed unemployment*588 Tennessee, Vermont) should impose
laws on the eve of the adoption of the Social on their employers burdens
Security Act, and two others did likewise substantially equivalent. St. of 1935,
after the federal act and later in the year. The c. 479, p. 655. Her fear of
statutes differed to some extent in type, but competition is thus forcefully
were directed to a common end. In 1936, attested. See, also, California
twenty-eight other states fell in line, and St.1935, c. 352, art. 1, s 2; Idaho
eight more the present year. But if states had Laws 1936 (Third Extra Session) c.
been holding back before the passage of the 12, s 26; Mississippi Laws, 1936, c.
federal law, inaction was not owing, for the 176, s 2-a.
most part, to the lack of sympathetic
interest. Many held back through alarm lest The Social Security Act is an attempt to find
in laying such a toll upon their industries, a method by which all these public agencies
they would place themselves in a position of may work together to a common end. Every
economic disadvantage as compared with dollar of the new taxes will continue in all
neighbors or competitors. See House Report, likelihood to be used and needed by the
No. 615, 74th Congress, 1st session, p. 8; *589 nation as long as states are unwilling,
Senate Report, No. 628, 74th Congress, 1st whether through timidity or for other
session, p. 11.FN9 Two consequences ensued. motives, to do what can be done at home. At
One was that the freedom of a state to least the inference is permissible that
contribute its fair share to the solution of a Congress so believed, though retaining
national problem was paralyzed by fear. The undiminished freedom to spend the money
other was that in so far as there was failure as it pleased. On the other hand, fulfillment
by the states to contribute relief according to of the home duty will be lightened and

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encouraged by crediting the taxpayer upon difficulties. The outcome of such a doctrine
his account with the Treasury of the nation is the acceptance of a philosophical
to the extent that his contributions **892 determinism by which choice becomes
under the laws of the locality have impossible. Till now the law has been
simplified or diminished the problem of guided by a robust common sense which
relief and the probable demand upon the assumes the freedom of the will as a
resources of the fisc. Duplicated taxes, or working hypothesis in the solution of its
burdens that approach them are recognized problems. The wisdom of the hypothesis has
hardships that government, state or national, illustration in this case. Nothing in the case
may properly avoid. Henneford v. Silas suggests the exertion of a power akin to
Mason Co., Inc., supra; Kidd v. Alabama, undue influence, if we assume that such a
188 U.S. 730, 732, 23 S.Ct. 401, 47 L.Ed. concept can ever be applied with fitness to
669; Watson v. State Comptroller, 254 U.S. the relations between state and nation. Even
122, 125, 41 S.Ct. 43, 44, 65 L.Ed. 170. If on that assumption the location of the point
Congress believed that the general welfare at which pressure turns into compulsion, and
would better be promoted by relief through ceases to be inducement, would be a
local units than by the system then in vogue, question of degree, at times, perhaps, of fact.
the co-operating localities ought not in all The point had not been reached when
fairness to pay a second time. Alabama made her choice. We cannot say
that she was acting, not of her unfettered
Who then is coerced through the operation will, but under the strain of a persuasion
of this statute? Not the taxpayer. He pays equivalent to undue influence, when she
in fulfillment of the mandate of the local chose to have relief administered under laws
legislature. Not the state. Even now she of her own making, by agents of her own
does not offer a suggestion that in passing selection, instead of under federal laws,
the unemployment law she was affected by administered by federal officers, with all the
duress. See Carmichael v. Southern Coal & ensuing evils, at least to many minds, of
Coke Co. (Carmichael v. Gulf States Paper federal patronage and power. There would
Corporation), supra. For all that appears, be a strange irony, indeed, if her choice were
she is satisfied with her choice, and would now to be annulled on the basis of an
be sorely disappointed if it were now to be assumed duress in the enactment of a statute
annulled. The difficulty with the petitioner's which her courts have accepted as a true
contention is that it confuses motive with expression of her will. Beeland Wholesale
coercion. Every tax is in some measure Co. v. Kaufman, supra. We think the choice
regulatory. To some extent it interposes an must stand.
economic impediment to the activity taxed
as compared with others not taxed. In ruling as we do, we leave many questions
Sonzinsky v. United States, supra. In like open. We do not say that a tax is valid, when
manner every rebate from a tax when imposed by act of Congress, if it is laid upon
conditioned upon conduct is in some the condition that a state may escape its
measure a temptation. But to hold that operation through the adoption of a statute
motive *590 or temptation is equivalent to unrelated in subject-matter to activities
coercion is to plunge the law in endless fairly within the scope of national policy and

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power. No such question is before us. In the permitting a credit, not exceeding 80 per
tender of this credit Congress does not cent., for the amount of any estate,
intrude upon fields foreign to its function. inheritance, legacy, or succession taxes
The purpose *591 of its intervention, as we actually paid to any State or
have shown, is to safeguard its own treasury Territory. Florida challenged that provision
and as an incident to that protection to place as unlawful. Florida had no inheritance taxes
the states upon a footing of equal and alleged that under its constitution it
opportunity. Drains upon its own resources could not levy any. 273 U.S. 12, 15, 47
are to be checked; obstructions to the S.Ct. 265, 71 L.Ed. 511. Indeed, by
freedom of the states are to be leveled. It is abolishing inheritance taxes, it had hoped to
one thing to impose a tax dependent upon induce wealthy persons to become its
the conduct of the taxpayers, or of the state citizens. See 67 Cong. Rec., Part 1, pp. 735,
in which they live, where the conduct to be 752. It argued at our bar that the Estate Tax
stimulated or discouraged is unrelated to the provision was not passed for the purpose
fiscal need subserved by the tax in its *592 of raising federal revenue ( 273 U.S.
normal operation, or to any other end 12, 14, 47 S.Ct. 265, 71 L.Ed. 511), but
legitimately national. The Child Labor Tax rather to coerce States into adopting estate
Case, 259 U.S. 20, 42 S.Ct. 449, 66 L.Ed. or inheritance tax laws' ( 273 U.S. 12, 13, 47
817, 21 A.L.R. 1432, and Hill v. Wallace, S.Ct. 265, 71 L.Ed. 511). In fact, as a result
259 U.S. 44, 42 S.Ct. 453, 66 L.Ed. 822, of the 80 per cent. credit, material changes
were decided in the belief that the statutes of such laws were made in thirty-six
there condemned were exposed to that states.FN10 In the face of that attack we
reproach. Cf. United States v. Constantine, upheld the act as valid. Cf. Massachusetts v.
296 U.S. 287, 56 S.Ct. 223, 80 L.Ed. 233. It Mellon, 262 U.S. 447, 482, 43 S.Ct. 597,
is quite another thing to say that a tax will be 599, 67 L.Ed. 1078; also Act of August 5,
abated upon the doing of an act that will 1861, c. 45, 12 Stat. 292; Act of May 13,
satisfy the fiscal need, the tax and the 1862, c. 66, 12 Stat. 384.
alternative being approximate equivalents.
In such circumstances, if in no others, FN10 Perkins, State Action under the
inducement or persuasion does not go Federal Estate Tax Credit Clause, 13
beyond the bounds of power. We do not fix North Carolina L. Rev. 271, 280.
the outermost line. Enough for present
purposes that wherever **893 the line may United States v. Butler, supra, is cited by
be, this statute is within it. Definition more petitioner as a decision to the contrary.
precise must abide the wisdom of the future. There a tax was imposed on processors of
farm products, the proceeds to be paid to
Florida v. Mellon, 273 U.S. 12, 47 S.Ct. farmers who would reduce their acreage and
265, 71 L.Ed. 511, supplies us with a crops under agreements with the Secretary
precedent, if precedent be needed. What was of Agriculture, the plan of the act being to
in controversy there was section 301 of the increase the prices of certain farm products
Revenue Act of 1926 (44 Stat. 69), which by decreasing the quantities produced. The
imposes a tax upon the transfer of a court held (1) that the socalled tax was not a
decedent's estate, while at the same time true one ( 297 U.S. 1, at pages 56, 61, 56

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S.Ct. 312, 315, 317, 80 L.Ed. 477, 102 defines the minimum criteria to which a
A.L.R. 914), the proceeds being earmarked state compensation system is required to
for the benefit of farmers complying with conform if it is to be accepted by the Board
the prescribed conditions, (2) that there was as the basis for a credit. The other section
an attempt to regulate production without (904FN12) rounds out the requirement with
the consent of the state in which production complementary rights and duties. Not all the
was affected, and (3) that the payments to criteria or their incidents are challenged as
farmers were coupled with coercive unlawful. We will speak of them first
contracts ( 297 U.S. 1, at page 73, 56 S.Ct. generally, and then more specifically in so
312, 322, 80 L.Ed. 477, 102 A.L.R. 914), far as they are questioned.
unlawful in their aim and oppressive in their
consequences. The decision was by a a FN11 See note 1, supra.
divided court, a minority taking the view
that the objections were untenable. None of FN12 See note 2, supra.
them is applicable to the situation here
developed. A credit to taxpayers for payments made to a
state under a state unemployment law will
(a) The proceeds of the tax in controversy be manifestly futile in the absence of some
are not earmarked for a special group. assurance that the law leading to the credit is
in truth what it professes to be. An
(b) The unemployment compensation law unemployment law framed in such a way
which is a condition of the credit has had the that the unemployed who look to it will be
approval of the state and could not be a law deprived of reasonable protection is one in
without it. name and nothing more. What is **894
basic and essential may be assured by
(c) The condition is not linked to an suitable conditions. The terms embodied in
irrevocable agreement, for the state at its these sections are directed to that end. A
pleasure may repeal its unemployment law wide range of judgment is given to the
(section 903(a)(6), 42 U.S.C.A. s 1103(a)(6), several states as to the particular type of
terminate the credit, *593 and place itself statute to be spread upon their books. For
where it was before the credit was accepted. anything to the contrary in the provisions of
this act they may use the pooled
(d) The condition is not directed to the unemployment form, which is in effect with
attainment of an unlawful end, but to an end, variations in Alabama, California, Michigan,
the relief of unemployment, for which New York, and elsewhere. They may
nation and state may lawfully coo perate. establish a system of merit ratings applicable
at *594 once or to go into effect later on the
[12] Fourth: The statute does not call for a basis of subsequent experience. Cf. Sections
surrender by the states of powers essential to 909, 910, 42 U.S.C.A. ss 1109, 1110. They
their quasi sovereign existence. may provide for employee contributions as
in Alabama and California, or put the entire
Argument to the contrary has its source in burden upon the employer as in New York.
two sections of the act. One section (903FN11) They may choose a system of

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unemployment reserve accounts by which Section 903(b, c), 42 U.S.C.A. s 1103(b, c).
an employer is permitted after his reserve
has accumulated to contribute at a reduced These basic considerations are in truth a
rate or even not at all. This is the system solvent of the problem. Subjected to their
which had its origin in Wisconsin. What test, the several objections on the score of
they may not do, if they would earn the abdication are found to be unreal.
credit, is to depart from those standards
which in the judgment of Congress are to be Thus, the argument is made that by force of
ranked as fundamental. Even if opinion may an agreement the moneys when withdrawn
differ as to the fundamental quality of one or must be paid through public employment
more of the conditions, the difference will offices in the State or such other agencies as
not avail to vitiate the statute. In determining the Board may approve. Section 903(a)(1),
essentials, Congress must have the benefit of 42 U.S.C.A. s 1103(a)(1). But in truth there
a fair margin of discretion. One cannot say is no agreement as to the method of
with reason that this margin has been disbursement. There is only a condition
exceeded, or that the basic standards have which the state is free at pleasure to
been determined in any arbitrary fashion. In disregard or to fulfill. Moreover, approval is
the event that some particular condition shall not requisite if public employment offices
be found to be too uncertain to be capable of are made the disbursing instruments.
enforcement, it may be severed from the Approval is to be a check upon resort to
others, and what is left will still be valid. other agencies' that may perchance, be
irresponsible. A state looking for a credit
We are to keep in mind steadily that the must give assurance that her system has
conditions to be approved by the Board as been organized upon a base of rationality.
the basis for a credit are not provisions of a
contract, but terms of a statute, which may There is argument again that the moneys
be altered or repealed. Section 903(a)(6). when withdrawn are to be devoted to
The state does not bind itself to keep the law specific uses, the relief of unemployment,
in force. It does not even bind itself that the and that by agreement for such payment the
moneys paid into the federal fund will be quasi-sovereign position of the state has
kept there indefinitely or for any stated time. been impaired, if not abandoned. But again
On the contrary, the Secretary of the there is confusion between promise and
Treasury will honor a requisition for the condition. Alabama is still free, without
whole or any part of the deposit in the fund breach of an agreement to change her
whenever one is made by the appropriate system over night. No officer or agency of
officials. The only consequence of the repeal the national government can force a
or excessive amendment of the statute, or compensation law upon her or keep it in
the expenditure of the money, when existence. No officer or agency of that
requisitioned, for other than compensation government, either by suit or other means,
uses or administrative expenses, is *595 that can supervise or control the application of
approval of the law will end, and with it the the payments.
allowance of a credit, upon notice to the
state agency and an opportunity for hearing. Finally and chiefly, abdication is supposed

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to follow from section 904 of the statute and report of the Ways and Means Committee of
the parts of section 903 that are the House of Representatives, quoted in the
complementary thereto. Section 903(a)(3). margin, develops the situation clearly.FN13
By these the Secretary of the Treasury is Nor is there risk of loss *597 or waste. The
authorized and directed to receive and hold credit of the Treasury is at all times back of
in the Unemployment Trust Fund all *596 the deposit, with the result that the right of
moneys deposited therein by a state agency withdrawal will be unaffected by the fate of
for a state unemployment fund and to invest any intermediate investments, just as if a
in obligations of the United States such checking account in the usual form had been
portion of the fund as is not in his judgment opened in a bank.
required to meet current withdrawals. We
are told that Alabama**895 in consenting to FN13 This last provision will not
that deposit has renounced the plenitude of only afford maximum safety for
power inherent in her statehood. these funds but is very essential to
insure that they will operate to
The same pervasive misconception is in promote the stability of business
evidence again. All that the state has done is rather than the reverse.
to say in effect through the enactment of a Unemployment reserve funds have
statute that her agents shall be authorized to the peculiarity that the demands
deposit the unemployment tax receipts in the upon them fluctuate considerably,
Treasury at Washington. Alabama being heaviest when business
Unemployment Act of September 14, 1935, slackens. If, in such times, the
section 10(i) (Gen.Acts Ala.1935, p. 961). securities in which these funds are
The statute may be repealed. Section 903(a) invested are thrown upon the market
(6), 42 U.S.C.A. s 1103(a)(6). The consent for liquidation, the net effect is likely
may be revoked. The deposits may be to be increased deflation. Such a
withdrawn. The moment the state result is avoided in this bill through
commission gives notice to the depositary the provision that all reserve funds
that it would like the moneys back, the are to be held by the United States
Treasurer will return them. To find state Treasury, to be invested and
destruction there is to find it almost liquidated by the Secretary of the
anywhere. With nearly as much reason one Treasury in a manner calculated to
might say that a state abdicates its functions promote business stability. When
when it places the state moneys on deposit business conditions are such that
in a national bank. investment in securities purchased on
the open market is unwise, the
There are very good reasons of fiscal and Secretary of the Treasury may issue
governmental policy why a state should be special nonnegotiable obligations
willing to make the Secretary of the exclusively to the unemployment
Treasury the custodian of the fund. His trust fund. When a reverse situation
possession of the moneys and his control of exists and heavy drains are made
investments will be an assurance of stability upon the fund for payment of
and safety in times of stress and strain. A unemployment benefits, the Treasury

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does not have to dispose of the the Treasury of the nation. Nowhere in our
securities belonging to the fund in scheme of government-in the limitations
open market but may assume them express or implied of our Federal
itself. With such a method of Constitution-do we find that she is
handling the reserve funds, it is prohibited from assenting to conditions that
believed that this bill will solve the will assure a fair **896 and just requital for
problem often raised in discussions benefits received. But we will not labor the
of unemployment compensation, point further. An unreal prohibition directed
regarding the possibility of to an unreal agreement will not vitiate an act
transferring purchasing power from of Congress, and cause it to collapse in ruin.
boom periods to depression periods.
It will in fact operate to sustain FN14 Cf. 12 Stat. 503 (7 U.S.C.A. s
purchasing power at the onset of a 301 et seq.); 26 Stat. 417 (7 U.S.C.A.
depression without having any s 321 et seq.).
counteracting deflationary
tendencies. House Report, No. 615, Fifth: Title III of the act is separable from
74th Congress, 1st session, p. 9. title IX, and its validity is not at issue.

[13] The inference of abdication thus The essential provisions of that title have
dissolves in thinnest air when the deposit is been stated in the opinion. As already
conceived of as dependent upon a statutory pointed out, the title does not appropriate a
consent, and not upon a contract effective to dollar of the public moneys. It does no more
create a duty. By this we do not intimate than authorize appropriations to be made in
that the conclusion would be different if a the future for the purpose of assisting states
contract were discovered. Even sovereigns in the administration of their laws, if
may contract without derogating from their Congress shall decide that appropriations are
sovereignty. Perry v. United States, 294 desirable. The title might be expunged, and
U.S. 330, 353, 55 S.Ct. 432, 436, 95 A.L.R. title IX would stand intact. Without a
1335, 79 L.Ed. 912; 1 Oppenheim, severability clause we should still be led to
International Law (4th Ed.) ss 493, 494; that conclusion. The presence of such a
Hall, International Law (8th Ed.) s 107; 2 clause (section 1103, 42 U.S.C.A. s 1303)
Hyde, International Law, s 489. The states makes the conclusion even clearer.
are at liberty, upon obtaining the consent of Williams v. Standard Oil Co., 278 U.S. 235,
Congress, to make agreements with one 242, 49 S.Ct. 115, 117, 73 L.Ed. 287, 60
another. Constitution, art. 1, s 10, par. 3. A.L.R. 596; Utah Power & Light Co. v.
Poole v. Fleeger, 11 Pet. 185, 209, 9 L.Ed. Pfost, 286 U.S. 165, 184, 52 S.Ct. 548, 553,
680; Rhode Island v. Massachusetts, 12 Pet. 76 L.Ed. 1038; Carter v. Carter Coal Co.,
657, 725, 9 L.Ed. 1233. We find no room for 298 U.S. 238, 312, 56 S.Ct. 855, 873, 80
doubt that they may do the like with L.Ed. 1160.
Congress if the essence of their statehood is
maintained without impairment.FN14 Alabama The judgment is affirmed.
*598 is seeking and obtaining a credit of
many millions in favor of her citizens out of Separate opinion of Mr. Justice

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McREYNOLDS. governments, are as much within the design


and care of the Constitution as the
That portion of the Social Security preservation of the Union and the
legislation here under consideration, I think, maintenance of the National Government.
exceeds the power granted to Congress. It The Constitution, in all its provisions, looks
unduly interferes with the orderly to an indestructible Union, composed of
government of the state by her own people indestructible States.'
and otherwise offends the Federal
Constitution. The doctrine thus announced and often
repeated, I had supposed was firmly
In Texas v. White (1869) 7 Wall. 700, 725, established. Apparently the states remained
19 L.Ed. 227, a cause of momentous really free to exercise governmental powers,
importance, this Court, through Chief not delegated or prohibited, without
Justice Chase, declared- interference by the federal government
through threats of punitive measures or
*599 But the perpetuity and indissolubility offers of seductive favors. Unfortunately, the
of the Union, by no means implies the loss decision just announced opens the way for
of distinct and individual existence, or of the practical annihilation of this theory; and no
right of self-government by the States. cloud of words or ostentatious parade of
Under the Articles of Confederation each irrelevant statistics should be permitted to
State retained its sovereignty, freedom, and obscure that fact.
independence, and every power, jurisdiction,
and right not expressly delegated to the *600 The invalidity also the destructive
United States. Under the Constitution, tendency of legislation like the act before us
though the powers of the States were much were forecefully pointed out by President
restricted, still, all powers not delegated to Franklin Pierce in a veto message sent to the
the United States, nor prohibited to the Senate May 3, 1854.FN1 He was a scholarly
States, are reserved to the States lawyer of distinction and enjoyed the advice
respectively, or to the people. And we have and counsel of a rarely able Attorney
already had occasion to remark at this term, General-Caleb Cushing of Massachusetts.
that the people of each State compose a This message considers with unusual
State, having its own government, and lucidity points here specially important. I
endowed with all the functions essential to venture to set out pertinent portions of it
separate and independent existence, and which must appeal to all who continue to
that without the States in union, there could respect both the letter and spirit of our great
be no such political body as the United charter.
States. (Lane County v. Oregon, 7 Wall. 71,
76, 19 L.Ed. 101). Not only, therefore, can FN1 Messages and Papers of the
there be no loss of separate and independent President by James D. Richardson,
autonomy to the States, through their union Vol. V, pp. 247-256.
under the Constitution, but it may be not
unreasonably said that the preservation of 'To the Senate of the United States:
the States, and the maintenance of their

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The bill entitled An Act making a grant of That none of it shall be sold at less than $1
public lands to the several States for the per acre, under penalty of forfeiture of the
benefit of indigent insane persons, which same to the United States.
was presented to me on the 27th ultimo, has
**897 been maturely considered, and is Third. That the expenses of the
returned to the Senate, the House in which it management and superintendence of said
originated, with a statement of the lands and of the moneys received therefrom
objections which have required me to shall be paid by the States to which they
withhold from it may approval. * * * may belong out of the treasury of said
States.
If in presenting my objections to this bill I
should say more than strictly belongs to the Fourth. That the gross proceeds of the sales
measure or is required for the discharge of of such lands or land scrip so granted shall
my official obligation, let it be attributed to be invested by the several States in safe
a sincere desire to justify my act before stocks, to constitute a perpetual fund, the
those whose good opinion I so highly value principal of which shall remain forever
and to that earnestness which springs from undiminished, and the interest to be
my deliberate conviction that a strict appropriated to the maintenance of the
adherence to the terms and purposes of the indigent insane within the several States.
federal compact offers the best, if not the
only, security for the preservation of our Fifth. That annual returns of lands or scrip
blessed inheritance of representative liberty. sold shall be made by the States to the
Secretary of the Interior, and the whole grant
The bill provides in substance: be subject to certain conditions and
limitations prescribed in the bill, to be
First. That 10,000,000 acres of land be assented to by legislative acts of said States.
granted to the several States, to be
apportioned among them in the compound This bill therefore proposes that the Federal
ratio of the geographical area and Government shall make provision to the
representation of said States in the House of amount of the value of 10,000,000 acres of
Representatives. land for an eleemosynary object within the
several States, to be administered by the
*601 Second. That wherever there are political authority of the same; and it
public lands in a State subject to sale at the presents at the threshold the question
reguiar price of private entry, the proportion whether any such act on the part of the
of said 10,000,000 acres falling to such State Federal Government is warranted and
shall be selected from such lands within it, sanctioned by the Constitution, the
and that to the States in which there are no provisions and principles of which are to be
such public lands land scrip shall be issued protected and sustained as a first and
to the amount of their distributive shares, paramount duty.
respectively, said scrip not to be entered by
said States, but to be sold by them and *602 It can not be questioned that if
subject to entry by their assignees: Provided, Congress has power to make provision for

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the indigent insane without the limits of this therefore, clearly is upon the
District it has the same power to provide for constitutionality and propriety of the Federal
the indigent who are not insane, and thus to Government*603 assuming to enter into a
transfer to the Federal Government the novel and vast field of legislation, namely,
charge of all the poor in all the States. It has that of providing for the care and support of
the same power to provide hospitals and all those among the people of the United
other local establishments for the care and States who by any form of calamity become
cure of every species of human infirmity, fit objects of public philanthropy.
and thus to assume all that duty of either
public philanthropy or public necessity to I readily and, I trust, feelingly acknowledge
the dependent, the orphan, the sick, or the the duty incumbent on us all as men and
needy which is now discharged by the States citizens, and as among the highest and
themselves or by corporate institutions or holiest of our duties, to provide for those
private endowments existing under the who, in the mysterious order of Providence,
legislation of the States. The whole field of are subject to want and to disease of body or
public beneficence is thrown open to the mind; but I can not find any authority in the
care and culture of the Federal Constitution for making the Federal
Government. Generous impulses no longer Government the great almoner of public
encounter the limitations and control of our charity throughout the United States. To do
imperious fundamental law; for however so would, in my judgment, be contrary to the
worthy may be the present object in itself, it letter and spirit of the Constitution and
is only one of a class. It is not exclusively subversive of the whole theory upon which
worthy of benevolent regard. Whatever the Union of these States is founded. And if
considerations dictate sympathy for this it were admissible to contemplate the
particular object apply in like manner, if not exercise of this power for any object
in the same degree, to idiocy, to physical whatever, I can not avoid the belief that it
disease, to extreme destitution. If Congress would in the end be prejudicial rather than
may and ought to provide for any one of beneficial in the noble offices of charity to
these objects, it may and ought to provide have the charge of them transferred from the
for them all. And if it be done in this case, States to the Federal Government. Are we
what answer shall be given when Congress not too prone to forget that the Federal
shall be called upon, as it doubtless will be, Union is the creature of the States, not they
to pursue a similar course of legislation in of the Federal Union? We were the
the others? It will obviously be vain to inhabitants of colonies distinct in local
reply that the object is worthy, but that the government one from the other before the
application has taken a wrong direction. The Revolution. By the Revolution the colonies
power will have been deliberately assumed, each became an independent State. They
the general obligation will by this act have achieved that independence and secured its
been acknowledged, and the question of recognition by the agency of a consulting
means and expediency will alone be left for body, which, from being an assembly of the
consideration.**898 The decision upon the ministers of distinct sovereignties instructed
principle in any one case determines it for to agree to no form of government which did
the whole class. The question presented, not leave the domestic concerns of each

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State to itself, was appropriately prohibited to the States, and that none of
denominated a Congress. When, having them are by any express language of the
tried the experiment of the Confederation, Constitution transferred to the United
they resolved to change that for the present States? Can it be claimed that any of these
Federal Union, and thus to confer on the functions of local administration and
Federal Government more ample authority, legislation are vested in the Federal
they scrupulously measured such of the Government by any implication? I have
*604 functions of their cherished never found anything in the Constitution
sovereignty as they chose to delegate to the which is susceptible of such a
General Government. With this aim and to construction. No one of the enumerated
this end the fathers of the Republic framed powers touches the subject or has even a
the Constitution, in and by which the remote analogy to it. The powers conferred
independent and sovereign States united upon the United States have reference to
themselves for certain specified objects and federal relations, or to the means of
purposes, and for those only, leaving all accomplishing*605 or executing things of
powers not therein set forth as conferred on federal relation. So also of the same
one or another of the three great character are the powers taken away from
departments-the legislative, the executive, the States by enumeration. In either case the
and the judicial-indubitably with the States. powers granted and the powers restricted
And when the people of the several States were so granted or so restricted only where
had in their State conventions, and thus it was requisite for the maintenance of peace
alone, given effect and force to the and harmony between the States or for the
Constitution, not content that any doubt purpose of protecting their common interests
should in future arise as to the scope and and defending their common sovereignty
character of this act, they ingrafted thereon against aggression from abroad or
the explicit declaration that the powers not insurrection at home.
delegated to the United States by the
Constitution nor prohibited by it to the **899 I shall not discuss at length the
States are reserved to the States respectively question of power sometimes claimed for
or to the people. the General Government under the clause of
the eighth section of the Constitution, which
Can it be controverted that the great mass gives Congress the power to lay and collect
of the business of Government-that involved taxes, duties, imposts, and excises, to pay
in the social relations, the internal debts and provide for the common defense
arrangements of the body politic, the mental and general welfare of the United States,
and moral culture of men, the development because if it has not already been settled
of local resources of wealth, the punishment upon sound reason and authority it never
of crimes in general, the preservation of will be. I take the received and just
order, the relief of the needy or otherwise construction of that article, as if written to
unfortunate members of society-did in lay and collect taxes, duties, imposts, and
practice remain with the States; that none of excises in order to pay the debts and in order
these objects of local concern are by the to provide for the common defense and
Constitution expressly or impliedly general welfare. It is not a substantive

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general power to provide for the welfare of conviction that we shall see the beginning
the United States, but is a limitation on the of the end.
grant of power to raise money by taxes,
duties, and imposts. If it were otherwise, all Fortunately, we are not left in doubt as to
the rest of the Constitution, consisting of the purpose of the Constitution any more
carefully enumerated and cautiously guarded than as to its express lauguage, for although
grants of specific powers, would have been the history of its formation, as recorded in
useless, if not delusive. It would be the Madison Papers, shows that the Federal
impossible in that view to escape from the Government in its present form emerged
conclusion that these were inserted only to from the conflict of opposing influences
mislead for the present, and, instead of which have continued to divide statesmen
enlightening and defining the pathway of the from that day to this, yet the rule of clearly
future, in involve its action in the mazes of defined powers and of strict construction
doubtful construction. Such a conclusion the presided over the actual conclusion and
character of the men who framed that sacred subsequent adoption of the Constitution.
instrument will never permit us to form. President Madison, in the Federalist, says:
Indeed, to suppose it susceptible of any
other construction would be to consign all The powers delegated to the proposed
the rights of the States and of the people of Constitution are few and defined. Those
the States to the mere discretion*606 of which are to remain in the State
Congress, and thus to clothe the Federal governments are numerous and indefinite. *
Government with authority to control the * * Its (the General Government's)
sovereign States, by which they would have jurisdiction extends to certain enumerated
been dwarfed into provinces or departments objects only, and leaves to the several States
and all sovereignty vested in an absolute a residuary and inviolable sovereignty over
consolidated central power, against which all other objects.'
the spirit of liberty has so often and in so
many countries struggled in vain. *607 In the same spirit President Jefferson
invokes the support of the State
In my judgment you can not by tributes to governments in all their rights as the most
humanity make any adequate compensation competent administrations for our domestic
for the wrong you would inflict by removing concerns and the surest bulwarks against
the sources of power and political action anti-republican tendencies; and President
from those who are to be thereby affected. If Jackson said that our true strength and
the time shall ever arrive when, for an object wisdom are not promoted by invasions of
appealing, however strongly, to our the rights and powers of the several States,
sympathies, the dignity of the States shall but that, on the contrary, they consist not in
bow to the dictation of Congress by binding the States more closely to the center,
conforming their legislation thereto, when but in leaving each more unobstructed in its
the power and majesty and honor of those proper orbit.
who created shall become subordinate to the
thing of their creation, I but feebly utter my The framers of the Constitution, in refusing
apprehensions when I express my firm to confer on the Federal Government any

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jurisdiction over these purely local objects, I respectfully submit that in a constitutional
in my judgment manifested a wise forecast point of view it is wholly immaterial
and broad comprehension of the true whether the appropriation be in money or in
interests of these objects themselves. It is land. * * *
clear that public charities Within the States
can be efficiently administered only by their To assume that the public lands are
authority. The bill before me concedes this, applicable to ordinary State objects, whether
for it does not commit the funds it provides of public structures, police, charity, or
to the administration of any other authority. expenses of State administration, would be
to disregard to the amount of the value of
I can not but repeat what I have before the public lands all the limitations of the
expressed, that if the several States, many of Constitution and confound to that extent all
which have already laid the foundation of distinctions between the rights and powers
munificent establishments of local of the States and those of the United States;
beneficence, and nearly all of which are for if the public lands may be applied to the
proceeding**900 to establish them, shall be support of the poor, whether sane or insane,
led to suppose, as, should this bill become a if the disposal of them and their proceeds be
law, they will be, that Congress is to make not subject to the ordinary limitations of the
provision for such objects the fountains of Constitution, then Congress possesses
charity will be dried up at home and the unqualified power to provide for
several States instead of bestowing their expenditures in the States by means of the
own means on the social wants of their own public lands, even to the degree of defraying
people may themselves, through the strong the salaries of governors, judges, and all
temptation which appeals to states as to other expenses of the government and
individuals, become humble suppliants for internal administration within the several
the bounty of the Federal Government, States.
reversing their true relations to this Union. *
** The conclusion from the general survey of
the whole subject is to my mind irresistible,
I have been unable to discover any and closes the question both of right and of
distinction on constitutional grounds or expediency so far as regards the principle of
grounds of expediency between an the appropriation proposed in this
appropriation of $10,000,000 directly from bill. Would not the admission of such power
the money in *608 the Treasury for the in Congress to dispose of the public domain
object contemplated and the appropriation of work the practical abrogation of some of the
lands presented for my sanction, and yet I most important provisions of the
can not doubt that if the bill proposed Constitution? * * *
$10,000,000 from the Treasury of the United
States for the support of the indigent insane *609 The general result at which I have
in the several States that the constitutional arrived is the necessary consequence of
question involved in the act would have those views of the relative rights, powers,
attracted forcibly the attention of Congress. and duties of the States and of the Federal
Government which I have long entertained

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and often expressed and in reference to roll tax levied is an excise within the power
which my convictions do but increase in of Congress; that the devotion of *610 not
force with time and experience. more than 90 per cent. of it to the credit of
employers in states which require the
No defense is offered for the legislation payment of a similar tax under so-called
under review upon the basis of emergency. unemployment-tax laws is not an
The hypothesis is that hereafter it will unconstitutional use of the proceeds of the
continuously benefit unemployed members **901 federal tax; that the provision making
of a class. Forever, so far as we can see, the the adoption by the state of an
states are expected to function under federal unemployment law of a specified character a
direction concerning an internal matter. By condition precedent to the credit of the tax
the sanction of this adventure, the door is does not render the law invalid. I agree that
open for progressive inauguration of others the states are not coerced by the federal
of like kind under which it can hardly be legislation into adopting unemployment
expected that the states will retain genuine legislation. The provisions of the federal law
independence of action. And without may operate to induce the state to pass an
independent states a Federal Union as employment law if it regards such action to
contemplated by the Constitution becomes be in its interest. But that is not coercion. If
impossible. the act stopped here, I should accept the
conclusion of the court that the legislation is
At the bar counsel asserted that under the not unconstitutional.
present act the tax upon residents of
Alabama during the first year will total But the question with which I have difficulty
$9,000,000. All would remain in the Federal is whether the administrative provisions of
Treasury but for the adoption by the state of the act invade the governmental
measures agreeable to the National Board. If administrative powers of the several states
continued, these will bring relief from the reserved by the Tenth Amendment. A state
payment of $8,000,000 to the United States. may enter into contracts; but a state cannot,
by contract or statute, surrender the
Ordinarily, I must think, a denial that the execution, or a share in the execution, of any
challenged action of Congress and what has of its governmental powers either to a sister
been done under it amount to coercion and state or to the federal government, any more
impair freedom of government by the people than the federal government can surrender
of the state would be regarded as contrary to the control of any of its governmental
practical experience. Unquestionably our powers to a foreign nation. The power to tax
federate plan of government confronts an is vital and fundamental, and, in the highest
enlarged peril. degree, governmental in character. Without
it, the state could not exist. Fundamental
Separate opinion of Mr. Justice also, and no less important, is the
SUTHERLAND. governmental power to expend the moneys
realized from taxation, and exclusively to
With most of what is said in the opinion just administer the laws in respect of the
handed down, I concur. I agree that the pay character of the tax and the methods of

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laying and collecting it and expending the act contemplates a surrender by the state to
proceeds. the federal government, in whole or in part,
of any state governmental power to
The people of the United States, by their administer its own unemployment law or the
Constitution, have affirmed a division of state pay roll-tax funds which it has
internal governmental powers between the collected for the purposes of that law. An
federal government and the governments of affirmative answer to this question, I think,
the several states-committing to the first its must be made.
powers by express grant and necessary
implication; to the latter, or *611 to the I do not, of course, doubt the power of the
people, by reservation, the powers not state to select and utilize a depository for the
delegated to the United States by the safe-keeping of its funds; but it is quite
Constitution, nor prohibited by it to the another thing to agree with the selected
States. The Constitution thus affirms the depository that the funds shall be withdrawn
complete supremacy and independence of for certain stipulated purposes, and for no
the state within the field of its powers. other. Nor do I doubt the authority of the
Carter v. Carter Coal Co., 298 U.S. 238, federal government and a state government
295, 56 S.Ct. 855, 865, 80 L.Ed. 1160. The to co-operate to a common end,
federal government has no more authority to provided*612 each of them is authorized to
invade that field than the state has to invade reach it. But such co-operation must be
the exclusive field of national governmental effectuated by an exercise of the powers
powers; for, in the oft-repeated words of this which they severally possess, and not by an
court in Texas v. White, 7 Wall. 700, 725, 19 exercise, through invasion or surrender, by
L.Ed. 227, the preservation of the States, one of them of the governmental power of
and the maintenance of their governments, the other.
are as much within the design and care of
the Constitution as the preservation of the An illustration of what I regard as
Union and the maintenance of the National permissible co-operation is to be found in
government. The necessity of preserving title I of the act now under consideration. By
each from every form of illegitimate that title, federal appropriations for oldage
intrusion or interference on the part of the assistance are authorized to be made to any
other is so imperative as to require this state which shall have adopted a plan for
court, when its judicial power is properly old-age assistance conforming to designated
invoked, to view with a careful and requirements. But the state is not obliged, as
discriminating eye any legislation a condition of having the federal bounty, to
challenged as constituting such an intrusion deposit in the federal treasury funds raised
or interference. See South Carolina v. United by the state. The state keeps its own funds
States, 199 U.S. 437, 448, 26 S.Ct. 110, 50 and administers its own law in respect of
L.Ed. 261, 4 Ann.Cas. 737. them, without let or hindrance of any kind
on the part of the federal government; so
The precise question, therefore, which we that we have simply the familiar case of
are required to answer by an application of federal aid upon**902 conditions which the
these principles is whether the congressional state, without surrendering any of its

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powers, may accept or not as it chooses. interpreter and censor of state legislation on
Massachusetts v. Mellon, 262 U.S. 447, 480, the subject, but, as lord paramount, to
482, 483, 43 S.Ct. 597, 598, 599, 67 L.Ed. determine whether the state is faithfully
1078. executing its own law-as though the state
were a dependency under pupilage FN1 and
But this is not the situation with which we not to be trusted. The foregoing, taken in
are called upon to deal in the present case. connection with the provisions that money
For here, the state must deposit the proceeds withdrawn can be used only in payment of
of its taxation in the federal treasury, upon compensation and that it must be paid
terms which make the deposit suspiciously through an agency approved by the federal
like a forced loan to be repaid only in board, leaves it, to say the least, highly
accordance with restrictions imposed by uncertain whether the right of the state to
federal law. Title IX, ss 903(a)(3), 904(a), withdraw any part of its own funds exists,
(b), (e), 42 U.S.C.A. ss 1103(a) (3), 1104(a, under the act, otherwise than upon these
b, e). All moneys withdrawn from this fund various statutory conditions. It is true also
must be used exclusively for the payment of that subsection (f) of section 904, 42
compensation. Section 903(a)(4), 42 U.S.C.A. s 1104(f), authorizes the Secretary
U.S.C.A. s 1103(a)(4). And this of the Treasury to pay to any state agency
compensation is to be paid through public such amount as it may duly requisition, not
employment offices in the state or such exceeding the amount standing to the
other agencies as a federal board may account of such State agency at the time of
approve. Section 903(a)(1), 42 U.S.C.A. s such payment. But it is to be observed that
1103(a)(1). The act, it is true, recognizes the payment is to be made to the state
section 903(a)(6), 42 U.S.C.A. s 1103(a)(6) agency, and only such amount as that agency
the power of the Legislature to amend or may duly requisition. It is hard to find in this
repeal its compensation law at any time. But provision any extension of the right of the
there is nothing in the act, as I read it, which state to withdraw its funds except in the
justifies the conclusion that the state may, in manner and for the specific purpose
that event, unconditionally withdraw its prescribed by the act.
*613 funds from the federal treasury.
Section 903(b), 42 U.S.C.A. s 1103(b), FN1 Compare Snow v. United
provides that the board shall certify in each States, 18 Wall. 317, 319, 320, 21
taxable year to the Secretary of the Treasury L.Ed. 784.
each state whose law has been approved.
But the board is forbidden to certify any By these various provisions of the act, the
state which the board finds has so changed federal agencies are authorized to supervise
its law that it no longer contains the and hamper the administrative powers of the
provisions specified in subsection (a), or state to a degree which not only does not
has with respect to such taxable year failed comport with the dignity of a quasi
to comply substantially with any such sovereign*614 state-a matter with which we
provision. The federal government, are not judicially concerned-but which deny
therefore, in the person of its agent, the to it that supremacy and freedom from
board, sits not only as a perpetual overseer, external interference in respect of its affairs

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which the Constitution contemplates-a The powers exclusively given to the federal
matter of very definite judicial concern. I government, it was said in Worcester v.
refer to some, though by no means all, of the State of Georgia, 6 Pet. 515, 570, 8 L.Ed.
cases in point. 483, are limitations upon the state
authorities. But *615 with the exception of
In the License Cases, 5 How. 504, 588, 12 these limitations, the states are supreme; and
L.Ed. 256, Mr. Justice McLean said that the their sovereignty can be no more invaded by
federal government was supreme within the the action of the general government, than
scope of its delegated powers, and the state the action of the state governments can
governments equally supreme in the arrest or obstruct the course of the national
exercise of the powers not delegated nor power.
inhibited to them; that the states exercise
their powers over everything connected with The force of what has been said is not
their social and internal condition; and that broken by an acceptance of the view that the
over these subjects the federal government state is not coerced by the federal law. The
had no power. They appertain to the State effect of the dual distribution of powers is
sovereignty as exclusively as powers completely to deny to the states whatever is
exclusively delegated appertain to the granted exclusively to the nation, and,
general government. conversely, to deny to the nation whatever is
reserved exclusively to the states. The
In Tarble's Case, 13 Wall. 397, 20 L.Ed. 597, determination of the Framers Convention
Mr. Justice Field, after pointing out that the and the ratifying conventions to preserve
general government and the state are complete and unimpaired state self-
separate and distinct sovereignties, acting government in all matters not committed to
separately and independently of each other the general government is one of the plainest
within their respective spheres, said that, facts which emerges from the history of
except in one particular, they stood in the their deliberations. And adherence to that
same independent relation to each other as determination is incumbent equally upon the
they would if their authority embraced federal government and the states. State
distinct territories. The one particular powers can neither be appropriated on the
referred to is that of the supremacy **903 of one hand nor abdicated on the other.
the authority of the United States in case of Carter v. Carter Coal Co., supra, 298 U.S.
conflict between the two. 238, at page 295, 56 S.Ct. 855, 866, 80
L.Ed. 1160. The purpose of the Constitution
In Farrington v. Tennessee, 95 U.S. 679, in that regard does not admit of doubt or
685, 24 L.Ed. 558, this court said, Yet every qualification; and it can be thwarted no more
State has a sphere of action where the by voluntary surrender from within than by
authority of the national government may invasion from without.
not intrude. Within that domain the State is
as if the union were not. Such are the checks Nor may the constitutional objection
and balances in our complicated but wise suggested be overcome by the expectation of
system of State and national polity. public benefit resulting from the federal
participation authorized by the act. Such

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expectation, if voiced in support of a statutory scheme is repugnant to the Tenth


proposed constitutional enactment, would be Amendment: The powers not delegated to
quite proper for the consideration of the the United States by the Constitution, nor
legislative body. But, as we said in the prohibited by it to the States, are reserved to
Carter Case, supra, 298 U.S. 238, at page the States respectively, or to the people. The
291, 56 S.Ct. 855, 864, 80 L.Ed. 1160, Constitution grants to the United States no
nothing is more certain than that beneficent power to pay unemployed persons or to
aims, however great or well directed, can require the states to enact laws or to raise or
never serve in lieu of constitutional power. disburse money for that purpose. The
Moreover, everything which the act seeks to provisions in question, if not amounting to
do for the relief of unemployment might coercion in a legal sense, are manifestly
have been accomplished, as is done by this designed and intended directly to affect state
same act for the relief of the misfortunes of action in the respects specified. And, if valid
old age, without*616 obliging the state to as so employed, this tax and credit device
surrender, or share with another government, may be made effective to enable federal
any of its powers. authorities to induce, if not indeed to
compel, state enactments for any purpose
If we are to survive as the United States, the within the realm of *617 state power and
balance between the powers of the nation generally to control state administration of
and those of the states must be maintained. state laws.
There is grave danger in permitting it to dip
in either direction, danger-if there were no **904 The act creates a Social Security
other-in the precedent thereby set for further Board and imposes upon it the duty of
departures from the equipoise. The threat studying and making recommendations as to
implicit in the present encroachment upon legislation and as to administrative policies
the administrative functions of the states is concerning unemployment compensation
that greater encroachments, and and related subjects. Section 702, 42
encroachments upon other functions, will U.S.C.A. s 902. It authorizes grants of
follow. money by the United States to States for old
age assistance, for administration of
For the foregoing reasons, I think the unemployment compensation, for aid to
judgment below should be reversed. dependent children, for maternal and child
welfare and for public health. Each grant
Mr. Justice VAN DEVANTER joins in this depends upon state compliance with
opinion. conditions prescribed by federal authority.
Mr. Justice BUTLER, dissenting. The amounts given being within the
I think that the objections to the challenged discretion of the Congress, it may at any
enactment expressed in the separate time make available federal money
opinions of Mr. Justice McREYNOLDS and sufficient effectively to influence state
Mr. Justice SUTHERLAND are well taken. I policy, standards and details of
am also of opinion that, in principle and as administration.
applied to bring about and to gain control
over state unemployment compensation, the The excise laid by section 901 (42 U.S.C.A.

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s 1101) is limited to specified employers. It the peril of federal tax not to raise revenue
is not imposed to raise money to pay but to persuade. Of course, each state was
unemployment compensation. But it is free to reject any measure so proposed. But,
imposed having regard to that subject for, if it failed to adopt a plan acceptable to
upon enactment of state laws for that federal authority, the full burden of the
purpose in conformity with federal federal tax would be exacted. And, as
requirements specified in the act, each of the federal demands similarly conditioned may
employers subject to the federal tax becomes be increased from time to time as Congress
entitled to credit for the amount he pays into shall determine, possible federal pressure in
an unemployment fund under a state law up that field is without limit. Already at least
to 90 per cent. of the federal tax. The forty-three states, yielding to the inducement
amounts yielded by the remaining 10 per resulting immediately from the application
cent., not assigned to any specific purpose, of the federal tax and credit device, have
may be applied to pay the federal provided for unemployment compensation
contributions and expenses in respect of in form to merit approval of the Social
state unemployment compensation. It is not Security Board. Presumably the remaining
yet possible to determine more closely the States will comply whenever convenient for
sums that will be needed for these purposes. their Legislatures to pass the necessary laws.

When the federal act was passed, Wisconsin The terms of the measure make it clear that
was the only state paying unemployment the tax and credit device was intended to
compensation. Though her plan then in force enable federal officers virtually to control
is by students of the subject generally the exertion of powers of the states in a field
deemed the best yet devised, she found it in which they alone have jurisdiction and
necessary to change her law in order to from which the United States is by the
secure federal approval. In the absence of Constitution excluded.
that, Wisconsin employers subject to the
*618 federal tax would not have been I am of opinion that the judgment of the
allowed any deduction on account of their Circuit Court of Appeals should be reversed.
contribution to the state fund. Any state
would be moved to conform to federal U.S. 1937.
requirements, not utterly objectionable, in Charles C. Steward Mach. Co. v. Davis
order to save its taxpayers from the federal 301 U.S. 548, 57 S.Ct. 883, 109 A.L.R.
tax imposed in addition to the contributions 1293, 81 L.Ed. 1279, 19 A.F.T.R. 510, 1937-
under state laws. 1 C.B. 444

Federal agencies prepared and took draft END OF DOCUMENT


bills to state Legislatures to enable and
induce them to pass laws providing for
unemployment compensation in accordance
with federal requirements and thus to obtain
relief for the employers from the impending
federal exaction. Obviously the act creates

2009 Thomson Reuters. No Claim to Orig. US Gov. Works.