Child Labor Tax Case

SCOTUSCase
Litigants=Bailey v. Drexel Furniture Co.
ArgueDateA=March 7
ArgueDateB=8
ArgueYear=1922
DecideDate=May 15
DecideYear=1922
FullName=J. W. Bailey and J. W. Bailey, Collector of Internal Revenue for the District of North Carolina v. Drexel Furniture Company
USVol=259
USPage=20
Citation=42 S. Ct. 449; 66 L. Ed. 817; 1922 U.S. LEXIS 2458; 3 A.F.T.R. (P-H) 3156; 1922-2 C.B. 337; 21 A.L.R. 1432; 1922 P.H. P17,023
Prior=Error to the District Court of the United States for the Western District of North Carolina
Subsequent=
Holding=Congress improperly penalized employers for using child labor.
SCOTUS=1921-1922
Majority=Taft
JoinMajority=McKenna, Holmes, Day, Van Devanter, Pitney, McReynolds, Brandeis
Dissent=Clarke
LawsApplied=

"Bailey v. Drexel Furniture Co.", 259 U.S. 20 (1922) [ussc|259|20|Full text of the opinion courtesy of Findlaw.com] , was a case in which the U.S. Supreme Court ruled the 1919 Child Labor Tax Law unconstitutional as an improper attempt by Congress to penalize employers using child labor. The Court indicated that the tax imposed by the statute was actually a penalty in disguise.

The Court later abandoned the philosophy underlying the "Bailey" case. For example, see "United States v. Kahriger", 345 U.S. 22 (1953), "overruled on other grounds", "Marchetti v. United States", 390 U.S. 39 (1968). See also Lochner era and "Lochner v. New York".

Background

On February 24, 1919, Congress passed the Child Labor Tax Law which imposed an excise tax of 10 percent on the net profits of a company who employed children. The law defined child labor as “under the age of sixteen in any mine or quarry, and under the age of fourteen in any mill, cannery, workshop, factory, or manufacturing establishment.” The definition also included the use of children between the ages of fourteen and sixteen who worked more than eight hours a day or more than six days a week, or who worked between the hours of 7:00 p.m. and 6:00 a.m.”Drexel was a furniture manufacturing company in North Carolina.

On September 21, 1921, a collector from the Bureau of Internal Revenue (now the Internal Revenue Service) assessed $6,312.79 in excise taxes for employing a child under fourteen during the 1919 tax year. Drexel paid the tax with protest but sued for a refund.

Procedural history

Drexel’s main argument was that the tax was an unconstitutional attempt to regulate manufacturing. The United States argued that the statute as an indirect tax did not need to meet a standard, but only had to be geographically uniform. In addition, the government contended that the tax was merely an excise tax levied by Congress under its broad power of taxation under Article 1 of the Constitution. The lower court ruled in favor of the company.

Issue presented

Did Congress violate the Constitution by passing the Child Labor Tax Law as a means to regulate or eliminate child labor, a power reserved to the states under the Tenth Amendment?

Holding

Chief Justice Taft declared the tax on child labor was unconstitutional because it was a penalty, not a tax, on employment of children. In addition, the Child Labor Tax Law is a regulation on businesses instead of a tax.

Reasoning

Taft argued the law describes a set course for businesses and when they deviate from that course, a payment is enacted. Taft said “scienter is associated with penalties, not with taxes.” “The court must be blind not to see that the so-called tax imposed to stop the employment of children within the age limits prescribed.” Taft said that the court must commit itself to the highest law of the land and the duty of the court, even though it requires them to refuse legislation designed to promote the highest good. He went on to say that the good sought in unconstitutional legislation leads citizens and legislators down a dangerous path of breaching the constitution and recognized standards. In addition, Congress could take control of many areas of public interest, which the States have control over reserved by the Tenth Amendment, by enacting regulating subjects and enforcing them by a so-called “tax.” This would break down the constitutional limitations on Congress and eliminate the sovereignty of States. A tax is a source of revenue for the government, while a penalty is a regulation and punishment for a certain behavior.

Implications

There are some (weasel word) who argue that the decision in Drexel was a reversal of the Supreme Court’s position on excise taxes since the early 1800s. They argue that this decision that was out of line with Supreme Court rulings before and after. As a general rule, the court repeatedly favored the federal power to tax. In other cases, the court has upheld Congress’s excise tax on narcotics, marijuana, and firearms. Even with the firearms case, the Court admitted the law was unmistakably a legislative purpose to regulate rather than tax.

After the court rejected both attempts by Congress to regulate child labor, Congress proposed a constitutional amendment which would give the national government the power to regulate and prohibit child labor. Unlike most proposed amendments, this did not have a deadline for state’s ratification. The proposed amendment eventually failed to achieve ratification, as many states passed their own child labor laws, making a federal amendment unnecessary.

ee also

*List of United States Supreme Court cases, volume 259

External links