Paul L. Caron

Sunday, July 8, 2012

A Short History of Congress's Power to Tax

Wall Street Journal op-ed:  A Short History of Congress's Power to Tax, by Paul Moreno (Dean of Faculty, Hillsdale College):

In 1935, Secretary of Labor Frances Perkins was fretting about finding a constitutional basis for the Social Security Act. Supreme Court Justice Harlan Fiske Stone advised her, "The taxing power, my dear, the taxing power. You can do anything under the taxing power."

Last week, in his ObamaCare opinion, NFIB v. Sebelius, Chief Justice John Roberts gave Congress the same advice—just enact regulatory legislation and tack on a financial penalty, as in failure to comply with the individual insurance mandate. So how did the power to tax under the Constitution become unbounded?

The first enumerated power that the Constitution grants to Congress is the "power to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States." The text indicates that the taxing power is not plenary, but can be used only for defined ends and objects—since a comma, not a semicolon, separated the clauses on means (taxes) and ends (debts, defense, welfare)....

After President Franklin D. Roosevelt threatened to "pack" the Supreme Court in 1937, it accepted such transfer payments in Mulford v. Smith (1939), so long as the taxes were paid into the general treasury and not earmarked for farmers. Justice Roberts has confirmed that there are no limits to regulatory taxation as long as the revenue is deposited in the U.S. Treasury.

Linda Beale (Wayne State), Paul Moreno's 'Short History' of the Taxing Power:

Maybe historians (Moreno is a historian at Hillsdale College) should leave tax analysis to tax experts. Let me say this here for the record: the Supreme Court would have looked utterly foolish if it had failed to uphold the mandate as an exercise of the taxing power. As noted by another commentator, failure to recognize the mandate's legitimacy under the taxing power would suggest that it was unconstitutional to tax to insure those under age 65, while Medicare is constitutional for taxing those at 65 or over. Further, it would make an impossible distinction between the insurance mandate's penalty provision and what could be called the Internal Revenue Code's marriage mandate penalty provision".

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Tax, tax, tax!
Spend. spend, spend!
No..., it's the other way 'round.

Tax da rich
Tax da po'
Tax us all 'till we got no mo'
Take yo dollar
Give ya back a dime
Charge a fine you don't pay on time
It da price of freedom million dollar politicians say
You pay..., or we gonna have da men with the tall black boots haul you 'way.

Posted by: Mason | Jul 11, 2012 11:31:10 AM

Beale is certainly an expert at making a circular argument.

Posted by: FC | Jul 9, 2012 10:14:07 AM

Article makes the standard misstatement that Pollock invalidated all income taxes. Not true. Only invalidated taxes on earnings from property. One must eventually assume political purpose in the repeating of historical misstatement as fact by presumably educated individuals.

Here's the quote, 158 U.S. 601, 637:

" First. We adhere to the opinion already announced—that, taxes on real estate being indisputably direct taxes, taxes on the rents or income of real estate are equally direct taxes.

Second. We are of opinion that taxes on personal property, or on the income of personal property, are likewise direct taxes.

Third. The tax imposed by sections 27 to 37, inclusive, of the act of 1894, so far as it falls on the income of real estate, and of personal property, being a direct tax, within the meaning of the constitution, and therefore unconstitutional and void, because not apportioned according to representation, all those sections, constituting one entire scheme of taxation, are necessarily invalid.

The decrees hereinbefore entered in this court will be vacated. The decrees below will be reversed, and the cases remanded, with instructions to grant the relief prayed."

Posted by: Killeen/Jeffrey | Jul 8, 2012 2:22:38 PM