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The Tax and Spending Clause of the Constitution

Instructor: Michelle Penn

Michelle has a J.D. and her PhD in History.

The taxing and spending clause of the United States Constitution gives the federal government the power to tax in order to pay debts and to provide for the 'common defense and general welfare' of the United States.

Why Is There a Taxing and Spending Clause?

What if the United States government could not collect tax? What if they had to ask for money from the states, and had no way to force anyone to give them the money they were owed? This is what the government was like before the United States Constitution was written. The inability of the government to collect taxes was a big problem under the Articles of Confederation. Neither Congress nor the Army ever had enough money because states did not want to pay.

Because of this problem, the authors of the United States Constitution included the Taxing and Spending Clause in Article 1, Section 8, of the new constitution. The clause states that 'The Congress shall have 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; but all Duties, Imposts and Excises shall be uniform throughout the United States.' Even though the clause doesn't mention the word 'spend' it has been understood that because Congress can tax, they can also spend the money they collect. The Constitution (including the taxing and spending clause) came into force in 1789. Since that time, clause has been interpreted narrowly by the Supreme Court until 1936, when it began taking a broader view towards the clause.

The first page of the United States Constitution, with Article 1 at the top
Constitution

Early Interpretations: Narrow vs. Broad Interpretations Among the Founding Fathers

James Madison, the fourth president of the United States, interpreted the clause narrowly. He believed that Congress could only tax and spend if their purpose was related to another power given to them in the Constitution, such as spending on the military. Thomas Jefferson, the third president, agreed with Madison.

Alexander Hamilton, the first United States Secretary of the Treasury took a broad approach to the clause. He believed that if the proposed spending benefited the public's general welfare, Congress could tax and spend as it wished. George Washington and John Adams, the first and second presidents, agreed with Hamilton.

Taxing and Spending in the 19th Century

In the 19th century, controversies over the taxing and spending clause mostly involved public works projects, such as Congress' attempts to building a railroad or canals. In 1817, President James Madison vetoed a bill that would build roads and canals across the United States, believing that it was not allowed by the clause. The next president, James Monroe, vetoed similar bills as did later presidents like Andrew Jackson. Because of the presidential veto, these controversies did not reach the Supreme Court.

1922: Narrow View of Clause in the Supreme Court

Initially, the United States Supreme Court adopted a narrow view of the clause. In 1922's Bailey v. Drexel Furniture Co., the Court found that a Child Labor Tax Law was unconstitutional because rather than being a tax, it was a penalty against employers that used child labor. While certain taxes were within Congress' power, this type of penalty was not. The court took a narrow view of the sort of taxes allowed by the taxing and spending clause.

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