Source: https://andysundberg.weebly.com/the-works/a-short-history-of-congresss-power-to-tax
Timestamp: 2019-04-24 18:29:33+00:00

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By Paul Moreno, WSJ, 6 July 2012. Mr. Moreno is a professor of history at Hillsdale College and the author of "The American State from the Civil War to the New Deal," forthcoming from Cambridge University Press.
Congress enacted very few taxes up to the end of the Civil War, and none that was a pretext for regulating things that the Constitution gave it no power to regulate. True, the purpose of tariffs was to protect domestic industry from foreign competition, not raise revenue. But the Constitution grants Congress a plenary power to regulate commerce with other nations.
Congress also enacted a tax to destroy state bank notes in 1866, but this could be seen as a "necessary and proper" means to stop the states from usurping Congress's monetary or currency power. It was upheld in Veazie Bank v. Fenno (1869).
The first unabashed use of the taxing power for regulatory purposes came when Congress enacted a tax on "oleomargarine" in 1886. Dairy farmers tried to drive this cheaper butter substitute from the market but could only get Congress to adopt a mild tax, based on the claim that margarine was often artificially colored and fraudulently sold as butter. President Grover Cleveland reluctantly signed the bill, saying that if he were convinced the revenue aspect was simply a pretext "to destroy . . . one industry of our people for the protection and benefit of another," he would have vetoed it.
Congress imposed another tax on margarine in 1902, which the Supreme Court upheld (U.S. v. McCray, 1904). Three justices dissented, but without writing an opinion.
Then, in 1914, Congress imposed taxes on druggists' sales of opiates as a way to regulate their use. Five years later, in U.S. v. Doremus , the Supreme Court upheld the levy under Congress's express power to impose excise taxes.
Then, in 1922, the court rejected Congress's attempt to prohibit child labor by imposing a tax on companies that employed children. An earlier attempt to accomplish this, by prohibiting the interstate shipment of goods made by child labor, was struck down as unconstitutional—since it was understood since the earliest days of the republic that Congress had the power to regulate commerce but not manufacturing. "A Court must be blind not to see that the so-called tax is imposed to stop the employment of children within the age limits prescribed," Chief Justice William Howard Taft wrote in Bailey v. Drexel Furniture Co. "Its prohibitory and regulatory effect and purpose are palpable." Even liberal justices Oliver Wendell Holmes and Louis D. Brandeis concurred in Taft's opinion.
Things came to a head in the New Deal, when Congress imposed a tax on food and fiber processors and used those tax dollars to provide benefits to farmers. Though in U.S. v. Butler (1936) the court adopted a more expansive view of the taxing power—allowing Congress to tax and spend for the "general welfare" beyond the powers specifically enumerated in the Constitution—it still held the ends had to be "general" and not transfer payments from one group to another. 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.
And now, in 2012, Justice Roberts has confirmed that there are no limits to regulatory taxation as long as the revenue is deposited in the U.S. Treasury.
Are there any other limits? Article I, Section 2 says that "direct taxes shall be apportioned among the states" according to population. This is repeated in Article I, Section 9, which says that "no capitation, or other direct tax, shall be laid," unless apportioned.
The Supreme Court struck down income taxes in 1895 (Pollock v. Farmers' Loan & Trust Co.), on the ground that they were "direct" taxes but not apportioned by population. Apportioning an income tax would defeat the purpose of the relatively poorer Southern and Western states, who wanted the relatively richer states of the Northeast to pay the bulk of the tax. The 16th Amendment gave Congress the power to tax incomes without apportionment.
Other direct taxes should presumably have to be apportioned according to the Constitution. Justice Roberts quickly dismissed the notion that the individual mandate penalty-tax is not a direct tax "under this Court's precedents." To any sentient adult, it looks like a "capitation" or head tax, imposed upon individuals directly. Unfortunately, having plenty of other reasons to object to ObamaCare, the four dissenting justices in NFIB v. Sebelius did not explore this point.
Some conservatives have cheered that part of Justice Roberts's decision that limits Congress's Commerce Clause power. But an unlimited taxing power is equally dangerous to constitutional government.

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