The Powers of Congress to tax - History

The Powers of Congress to tax - History

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The Constitution gives Congress all its legislative powers. Section 8 of Article I gives the Congress its specific enumerated powers: "the Congress shall have power to lay and collect taxes, duties, imposts, and excises, to pay the debt 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."


The first responsibility of Congress is taxation. Over the years, Congress has imposed various forms of tax, from import duties to income taxes. Throughout American history, taxation has remained one of the most controversial aspects of congressional power, No one likes to pay taxes, and finding the proper balance in tax policy has always been difficult. During most of the nineteenth century, the level and function of tariffs were highly debated. In the twentieth century, the issues have usually revolved around the rate of income taxes.

The Constitution places four explicit limits on the type of taxes that can be imposed. First of all, taxes can only be imposed for the common good. Tax revenue can be used to pay the debt, and provide for the common defense and general welfare of the United States. Secondly, no taxes on exports are allowed. The third limitation is that direct taxes must be apportioned to the states according to their population. A direct tax is any tax that is imposed directly on the people that pay it--for example, an income tax or a poll tax. However, the Sixteenth Amendment removes the third limitation from income taxes. Finally, all duties imposts and excises must be uniform throughout the United States.

-The Constitution places four limits on congress’s power to tax: -(1) Congress may tax only for public purposes, not for private benefit. -(2) Congress may not tax exports. -(3) Direct taxes must be apportioned among the States, according to their populations.

The Constitution limits federal and state powers of taxation with specific clauses that lay out specific limits on the government’s power to tax. First, the purpose of a tax must be for the “common defense and general welfare,” meaning it cannot raise money that will go to individual interests.

The Powers of Congress to tax - History

The Articles of Confederation was the United States' first constitution. Proposed by the Continental Congress in 1777, it was not ratified until 1781.

The Articles represented a victory for those who favored state sovereignty. Article 2 stated that "each State retains its sovereignty, freedom and independence, and every power. which is not. expressly delegated to the United States.…" Any amendment required unanimous consent of the states.

The Articles of Confederation created a national government composed of a Congress, which had the power to declare war, appoint military officers, sign treaties, make alliances, appoint foreign ambassadors, and manage relations with Indians. All states were represented equally in Congress, and nine of the 13 states had to approve a bill before it became law.

Under the Articles, the states, not Congress, had the power to tax. Congress could raise money only by asking the states for funds, borrowing from foreign governments, or selling western lands. In addition, Congress could not draft soldiers or regulate trade. There was no provision for national courts.

The Articles of Confederation did not include a president. The states feared another George III might threaten their liberties. The new framework of government also barred delegates from serving more than three years in any six year period.

The Articles of Confederation created a very weak central government. It is noteworthy that the Confederation Congress could not muster a quorum to ratify on time the treaty that guaranteed American independence, nor could it pay the expense of sending the ratified treaty back to Europe.

The Articles' framers assumed that republican virtue would lead to states to carry out their duties and obey congressional decisions. But the states refused to make their contributions to the central government. Its acts were "as little heeded as the cries of an oysterman." As a result, Congress had to stop paying interest on the public debt. The Continental army threatened to mutiny over lack of pay.

A series of events during the 1780s convinced a group of national leaders that the Articles of Confederation provided a wholly inadequate framework of government.

ArtI.S8.C1.2 Spending Power

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States but all Duties, Imposts and Excises shall be uniform throughout the United States . . .

The grant of power to provide . . . for the general welfare raises a two-fold question: how may Congress provide for the general welfare and what is the general welfare that it is authorized to promote? The first half of this question was answered by Thomas Jefferson in his opinion on the Bank as follows: [T]he laying of taxes is the power, and the general welfare the purpose for which the power is to be exercised. They [Congress] are not to lay taxes ad libitum for any purpose they please but only to pay the debts or provide for the welfare of the Union. In like manner, they are not to do anything they please to provide for the general welfare, but only to lay taxes for that purpose. 1 Footnote
3 Writings of Thomas Jefferson 147–149 (Library Edition, 1904) . The clause, in short, is not an independent grant of power, but a qualification of the taxing power. Although a broader view has been occasionally asserted, 2 Footnote
See W. Crosskey , Politics and the Constitution in the History of the United States (1953) . Congress has not acted upon it and the Court has had no occasion to adjudicate the point.

With respect to the meaning of the general welfare the pages of The Federalist itself disclose a sharp divergence of views between its two principal authors. Hamilton adopted the literal, broad meaning of the clause 3 Footnote
The Federalist Nos. 30, 34 , at 187–93, 209–15 (Jacob E. Cooke ed., 1961) . Madison contended that the powers of taxation and appropriation of the proposed government should be regarded as merely instrumental to its remaining powers in other words, as little more than a power of self-support. 4 Footnote
Id. No. 41 , at 268–78 . From early times, Congress has acted upon Hamilton's interpretation. Appropriations for subsidies 5 Footnote
1 Stat. 229 (1792). and for an ever-increasing variety of internal improvements 6 Footnote
2 Stat. 357 (1806). constructed by the Federal Government, had their beginnings in the administrations of Washington and Jefferson. 7 Footnote
In an advisory opinion, which it rendered for President Monroe at his request on the power of Congress to appropriate funds for public improvements, the Court answered that such appropriations might be properly made under the war and postal powers. See Albertsworth , Advisory Functions in the Supreme Court , 23 Geo. L. J. 643, 644–647 (1935) . Monroe himself ultimately adopted the broadest view of the spending power, from which, however, he carefully excluded any element of regulatory or police power. See his Views of the President of the United States on the Subject of Internal Improvements , of May 4, 1822, 2 Messages and Papers of the Presidents 713–752 (Richardson ed., 1906) . Since 1914, federal grants-in-aid, which are sums of money apportioned among the states for particular uses, often conditioned upon the duplication of the sums by the recipient state, and upon observance of stipulated restrictions as to their use, have become commonplace.

The Three Categories of Commerce Clause Jurisprudence

Channels of Commerce

The channels of commerce doctrine has been interpreted so as to represent a broad power to regulate. To begin, this category is the basis for a variety of statutes that directly regulate the movement of persons or goods across state lines. For instance, the United States Code contains extensive references to mailing or shipping material in interstate commerce, including regulations or bans on shipping biological agents, 76 counterfeit documents, 77 explosives, 78 or threatening communications. 79

Of more significance is that the Court has not required that any nexus exist between the time that a person crosses a state border and the time the person engages in a prohibited activity. For instance, in United States v. Sullivan, 80 the Court addressed the application of Section 301k of the Federal Food, Drug, and Cosmetic Act 81 to a local pharmacist. The section prohibits the "doing of any . act with respect to, a . drug . if such act is done while such article is held for sale after shipment in interstate commerce and results in such article being misbranded." The pharmacist was charged with "misbranding" sulfathiazole by not providing sufficient information regarding dosage and usage.

The Court in Sullivan relied on precedent finding that Congress has not only the power to regulate commerce among the states, but also the power to "keep the channels of such commerce free from the transportation of illicit or harmful articles." 82 The fact that the defendant here had bought the item after it had passed over state lines was not found to be of constitutional significance. 83 Thus, the Court appears to require only that the criminal activity in question has some relation to the crossing of state lines.

Consistent with this line of reasoning, there are laws, such as criminal prohibitions on mail fraud, 84 where the material is regulated not because it is by nature harmful, but rather because it relates to other behavior which is criminal. Or, there are laws prohibiting crimes based on a person crossing the state line with the intent to commit the sexual abuse of minors, where it is the activity engaged in after the line is crossed that is criminal. 85 Finally, there are laws that regulate activities which utilize materials after they have been shipped in interstate commerce, even if the materials were perfectly legal when they were transported. 86

Ultimately, based on cases such as Sullivan, it would appear that statutes that would otherwise be in violation of the limitations of Lopez could be approved by courts because of the presence of the jurisdictional element that an item related to the crime had crossed a state line. Under this reasoning, the gun possession law struck down in Lopez, which has since been amended to require that the gun had previously been shipped in interstate commerce, 87 would be upheld. 88 Thus, an expansive reading of the channels of commerce doctrine would appear to stand in the way of a limited interpretation of the Commerce Clause.

Instrumentalities of Interstate Commerce

Under the "instrumentalities of commerce" category, Congress may properly make whatever regulations it sees fit for the safety, efficiency, and accessibility of the nationwide transportation and communications networks. For instance, in Preseault v. Interstate Commerce Commission, 89 the Court considered whether Congress could prevent the reversion of railroad rights-of-way to property owners after abandonment in order to create recreational trails. The Interstate Commerce Commission (ICC) argued that turning the right-of-ways into recreational trails was preserving the rail corridors for future railroad use. Despite arguments that the preservation argument was a pretext, the Court held that it must defer to a congressional finding that a regulated activity affects interstate commerce "if there is any rational basis for such a finding." 90

The instrumentalities of commerce category represents yet another significant basis for expansive congressional authority. As noted previously, federal mail and wire fraud statutes make it a crime to engage in fraud while using the telephone or the mail. By analogy, Congress could reach many other activities that utilize these networks or similar networks such as railroads, interstate highways, and even the Internet. While this category has not been fully occupied by Congress, it would appear that a significant amount of federal power could be exercised in this manner, regardless of whether the matter regulated involved non-economic activity. 91 The Court has not yet indicated whether the Lopez requirement that regulated activities have some connection to a commercial activity would be applicable in this category.

Substantial Impact on Interstate Commerce

Wickard v. Filburn

The third prong of Congress's power to regulate under the Commerce Clause involves those activities that have a substantial impact or effect on interstate commerce. To fully understand the scope and reach of this power, it is important to begin with an examination of the Court's 1942 decision in Wickard v. Filburn, 92 which led to the expansive view of the Commerce Clause that Congress operated under until 1995. In Wickard, the Court was asked to determine whether, under the Commerce Clause, amendments to the Agricultural Adjustment Act of 1938 implementing a quota system to restrict the amount of wheat that could be harvested and sold applied to individuals who produced and consumed homegrown bushels of wheat. 93

In upholding the statute as constitutional, the Court held that economic activities, regardless of their nature, could be regulated by Congress if the activity "asserts a substantial impact on interstate commerce. " 94 The Court reasoned that the growing of wheat, even if only for a family's personal consumption, provided an alternative to the marketplace that was both viable and competitive. 95 Although the Court admitted that one family's production alone would likely have a negligible impact on the overall price of wheat, if combined with other personal producers the effect would be substantial enough to make the activity subject to congressional regulation. 96 The rationale of combining individual effects to find substantial impacts on interstate commerce has become known as the "aggregation theory," and arguably represents the most far reaching example of Congress's authority to regulate under the Commerce Clause. 97

Lopez and Morrison

After Wickard, the Court consistently held that a "rational basis" existed for Congress to enact laws under the theory that the regulated behavior substantially affected interstate commerce. 98 Despite the consistency of these decisions, it was not always clear whether the activity in question met the "substantially affects" test. Then in 1995, when the Court decided the Lopez case, as discussed previously, it explored the limits of the "substantially affects" test.

Subsequently, in United States v. Morrison, 99 the Court invalidated a portion of the Violence Against Women Act, which specifically created a private right of action against anyone who committed such a crime, allowing an injured party to obtain damages and other compensatory relief. 100 Applying its holding in Lopez, the Court concluded that the activity regulated by the act could not be classified as "economic activity," and therefore the aggregation principle established by Wickard did not apply. The Court, however, stopped short of establishing a rule that all non-economic activity cannot be aggregated. 101 In addition, the Court concluded that the act contained no jurisdictional element connecting the creation of a federal cause of action for gender-motivated violence to Congress's power to regulate interstate commerce. 102

Further, while in Morrison, unlike in Lopez, there were numerous congressional findings, the Court stressed that although findings by the legislative branch can serve to illuminate the relationship between the regulation and interstate commerce, constitutionality ultimately turns on the legal aspects of the substantial effects doctrine, and therefore, is for the Court to decide. 103 In this case, the Court found that the legislative findings detailing the effects on interstate commerce by gender-motivated violence were based in large part on the "costs of crime," which was nearly identical to the reasoning expressly rejected by the Court in Lopez. 104

Finally, the Court considered the level of attenuation between the regulated activity and its effect on interstate commerce. In this case, the Court concluded that the regulation of gender-motivated violent crime was not directed at the instrumentalities, channels or goods involved in interstate commerce, and was therefore beyond the scope of Congress's authority. 105

In sum, after Lopez and Morrison, the test to determine whether a regulation has a substantial effect on interstate commerce requires reviewing courts to consider the following four factors: (1) whether the regulated activity is commercial or economic in nature (2) whether an express jurisdictional element is provided in the statute to limit its reach (3) whether Congress made express findings about the effects of the proscribed activity on interstate commerce and (4) whether the link between the prohibited activity and the effect on interstate commerce is attenuated. 106

Gonzales v. Raich

After the decision in Lopez and Morrison, the question arose as to whether these cases were a harbinger of future restrictions on Congress's power to legislate. Arguably, the Court had intended Lopez and Morrison to have a limited effect, as the Court specifically reaffirmed much of its previous Commerce Clause case law. Further, the statutory provisions challenged in Lopez (criminal penalties for gun possession in or near schools) and Morrison (civil suits for gender-motivated crime) were relatively unusual for statutes based on the Commerce Clause in that they did not contain a specific requirement that the activities be related to commerce. In addition, while broad economic regulation may have noneconomic elements (e.g., record-keeping requirements), the provisions in question were activities not associated with such larger schemes.

Accordingly, when provisions contained in broader regulatory schemes were challenged after Lopez and Morrison, the lower courts generally upheld them under a "broader scheme" doctrine. 107 This doctrine is largely derived from language in Lopez that arguably permits congressional regulation of noneconomic activity if the regulation is "an essential part of a larger regulatory scheme, in which the regulatory scheme would be undercut unless the intrastate activity was regulated." 108

Nonetheless, some lower courts considering non-economic provisions of larger regulatory schemes found that such laws might be struck down in certain applications. Generally, a court reviewing the constitutionality of a federal statute may declare the statute unconstitutional either as invalid on its face, 109 or "as applied" to a particular set of circumstances. 110 Utilizing an "as applied" standard, various lower courts struck down particular applications of broader statutory schemes. 111

When presented with an "as applied" challenge, these courts initially attempted to define the relevant "class of activity" presented by the facts of the specific case. For instance, in Ashcroft v. Raich, the United States Court of Appeals for the Ninth Circuit (Ninth Circuit) considered a challenge to the Controlled Substances Act. The challenging parties were seriously ill California residents who had obtained marijuana consistent with California's Compassionate Use Act 112 but in violation of the federal Controlled Substances Act (CSA). 113 The Ninth Circuit found the class of activity to be the "intrastate, noncommercial cultivation, possession and use of marijuana for personal medical purposes on the advice of a physician and in accordance with state law." 114 Having defined the relevant class of activity, the court proceeded to apply the four factor Morrison test.

With respect to the first factor—whether or not the activity is commercial or economic in nature—the court concluded that the narrow class of activity in this case could not be considered commercial or economic in nature. 115 The court next considered whether the CSA contains an express jurisdictional element that would limit its reach to those cases that substantially affect interstate commerce. With no stated analysis, and apparently persuaded by the reasoning of a district court opinion, the court concluded that "[n]o such jurisdictional hook exists in the relevant portions of the CSA." 116

With respect to whether the legislative history contains congressional findings regarding the effects on interstate commerce, the court was able to cite findings relating to the effect that intrastate drug trafficking activity would have on interstate commerce. 117 While admitting that the legislative history lends support to the constitutionality of the statute under the Commerce Clause, the court proceeded to diminish the importance of these findings by arguing that they were not specific to either marijuana or the medicinal use of marijuana, but rather related to the general effects of drug trafficking on interstate commerce. 118 In addition, the court referred to language in Morrison, discussing the limited role of congressional findings. 119 Moreover, the court referenced Ninth Circuit precedent concluding that the first and fourth prongs of the Morrison test—whether the statute regulates an economic enterprise and whether the link is attenuated—are the most significant factors to the analysis. 120

Finally, with respect to whether the link between the regulated activity and a substantial effect on interstate commerce is attenuated, the court expressed doubt that the interstate effect of homegrown medical marijuana is substantial. Citing authority questioning the validity of the federal government's claim of an effect on interstate commerce, 121 the court concluded that "this factor favors a finding that the CSA cannot constitutionally be applied to the class of activities at issue in this case." 122

The United States Supreme Court granted certiorari specifically on the question of whether the power vested in Congress by both the "Necessary and Proper Clause, and the Commerce Clause of Article I includes the power to prohibit the local growth, possession, and use of marijuana permissible as a result of California's law." 123 Justice Stevens, writing for the majority in the now-entitled Gonzales v. Raich, reversed the Ninth Circuit's decision and held that Congress's power to regulate commerce extends to purely local activities that are "part of an economic class of activities that have a substantial effect on interstate commerce." 124

In reaching its conclusions, the Court relied heavily on its 1942 decision in Wickard v. Filburn, which held that the Agricultural Adjustment Act's federal quota system applied to bushels of wheat that were homegrown and personally consumed. Wickard stands for the proposition that Congress can rationally combine the effects that individual producers have on a commercial market to find substantial impacts on interstate commerce. 125 The Court pointed to numerous similarities between the facts presented in Raich and those in Wickard. Initially, the Court noted that because the commodities being cultivated in both cases are fungible and that well-established interstate markets exist, both markets are susceptible to fluctuations in supply and demand based on production intended for home consumption being introduced into the national market. 126

According to the Court, just as there was no difference between the wheat Mr. Wickard produced for personal consumption and the wheat cultivated for sale on the open market, there is no discernable difference between personal home-grown medicinal marijuana and marijuana grown for the express purpose of being sold in the interstate market. 127 Thus, the Court concluded that Congress had a rational basis for concluding that "leaving home-consumed marijuana outside federal control would similarly affect price and market conditions." 128

Respondents argued that Wickard was distinguishable because in the case of wheat the activity involved was purely commercial, and the evidence clearly established that the aggregate production of wheat had a significant effect on the interstate market. Conversely, respondents claimed that the activity at issue in Raich was non-commercial—the respondents had never attempted to sell their marijuana—and Congress had made no finding that the personal cultivation and use of medicinal marijuana has a substantial effect on the interstate marijuana market. 129 The Court, however, noted that the standard for assessing the scope of Congress's power under the Commerce Clause is not whether the activity at issue, when aggregated, substantially affects interstate commerce but rather, whether there exists a "rational basis" for Congress to have concluded as such. 130 The Court, applying this deferential standard, concluded that "Congress had a rational basis for believing that failure to regulate the intrastate manufacture and possession of marijuana would leave a gaping hole in the CSA." 131 Moreover, the Court affirmed that "Congress was acting well within its authority to 'make all Laws which shall be necessary and proper' to 'regulate Commerce . among the several States.'" 132

Despite having concluded that under the "rational basis test" Congress had acted within its constitutional authority when it enacted the CSA and applied it to intrastate possession of marijuana, the Court nevertheless had to distinguish Lopez and Morrison, the Court's more recent Commerce Clause decisions. The Court concluded that the CSA, unlike the statutes in either Lopez (Gun-Free School Zones Act) or Morrison (Violence Against Women Act), regulated activity that is "quintessentially economic," therefore, neither Lopez or Morrison cast any doubts on the constitutionality of the statute. 133 The Court specifically rejected the reasoning used by the Ninth Circuit, concluding that "Congress acted rationally in determining that none of the characteristics making up the purported class, whether viewed individually or in the aggregate, compelled an exemption from the CSA rather, the subdivided class of activities defined by the Court of Appeals was an essential part of the larger regulatory scheme." 134

In supporting its conclusions, the Court noted that, by characterizing marijuana as a "Schedule I" narcotic, Congress was implicitly finding that it had no medicinal value at all. In addition, the Court returned to the fact that medicinal marijuana was a fungible good, thus making it indistinguishable from the recreational versions that Congress had clearly intended to regulate. According to the Court, to carve out medicinal use as a distinct class of activity, as the Ninth Circuit had done, would effectively make "any federal regulation (including quality, prescription, or quantity controls) of any locally cultivated and possessed controlled substance for any purpose beyond the 'outer limits' of Congress'[s] Commerce Clause authority." 135 Moreover, the Court held that California's state law permitting the use of marijuana for medicinal purposes cannot be the basis for placing the respondent's class of activity beyond the reach of the federal government, due to the Supremacy Clause, which requires that, in the event of a conflict between state and federal law, the federal law shall prevail. 136

Finally, the Court replied to the respondent's argument that its activities are not an "essential part of a larger regulatory scheme" because they are both isolated and policed by the State of California and they are completely separate and distinct from the interstate market. 137 The Court held that not only could Congress have rationally rejected this argument, but also that it "seem[ed] obvious" that doctors, patients, and caregivers will increase the supply and demand for the substance on the open market. 138 In sum, the Court concluded that the case for exemption can be distilled down to an argument that a locally grown product used domestically is immune from federal regulation, which has already been precluded by the Court's decision in Wickard v. Filburn. 139

NFIB v. Sebelius

While the decision in Raich seemed to indicate that Congress still retained broad power over activity that affects interstate commerce, the Court has subsequently held that this power extends only to cases into which commercial activity has already been entered. In 2010, Congress passed the Patient Protection and Affordable Care Act 140 as amended by the Health Care and Education Reconciliation Act of 2010. 141 Jointly referred to as the Affordable Care Act (ACA), the ACA, among other things, mandates the purchasing of health insurance by certain individuals who do not have such insurance. Following the enactment of the ACA, state attorneys general and others brought several lawsuits challenging various provisions of the ACA on constitutional grounds. 142 Much of this litigation was resolved by the Supreme Court in the case of National Federation of Independent Business (NFIB) v. Sebelius. 143

Chief Justice Roberts, in a controlling opinion, 144 found that the Commerce Clause does not provide Congress with the authority to enact the individual mandate. 145 While the Chief Justice acknowledged that Congress's authority to regulate interstate commerce is quite broad, he also pointed out that Congress had never attempted to use this power to make individuals buy an undesired product. The Chief Justice further noted that the language of the clause (i.e., the power to regulate interstate commerce) reflects the idea that there must be something to regulate in the first place (i.e., some type of "activity"). 146

The problem with the individual mandate, as indicated by the Chief Justice, is that it "does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product on the ground that their failure to do so affects interstate commerce." 147 The Chief Justice concluded that such a construction of the Commerce Clause would greatly expand the reach of the clause beyond permissible bounds. He further explained that regulating individuals based on what they fail to do would fundamentally change the relationship between the citizen and the federal government in a way that was not intended by the framers of the Constitution. 148

The Obama Administration had argued that virtually all individuals are active in the health care market because they will need health care at some point. However, the Chief Justice declined to accept this line of reasoning, opining that the Court's Commerce Clause precedent does not support the idea that Congress can dictate the conduct of an individual today based on predicted future activity. 149 The Administration had also argued that the requirement to purchase health insurance was different from other products because, for example, individuals receive health care services even though they cannot pay for them, and the costs of those services can be passed on to others in various ways such as higher insurance premiums. The Chief Justice disagreed with this argument, noting that if the Court followed this reasoning, a mandatory purchase could be permitted to solve almost any problem. 150 In other words, if Congress could require the purchase of health insurance, it could require Americans to purchase anything. 151

Significance of McCulloch v. Maryland

Although McCulloch v. Maryland gave the federal government wide-ranging authority, even the ruling wasn’t enough to protect the second Bank of the United States from its political opposition. In 1832, President Andrew Jackson, a vehement opponent of the bank, ordered that the federal government’s deposits be withdrawn and deposited in state banks. This order caused the national bank to lose a lot of its power and influence.

In 1834, the U.S. House of Representatives voted against renewing the bank’s charter, and it faded from existence. However, in the early 1900s, a succession of banking crises prompted Congress to revise the idea of a national bank, and in 1913, the Federal Reserve System was created.

Ultimately, McCulloch v. Maryland made possible the rise of what some have labeled “the administrative state,” in which the government employs officials to oversee many aspects of American life, from environmental issues to labor disputes.

Article I, Sec. 8: Federalism and the Overall Scope of Federal Power

In practice, federalism has waxed and waned since the founding, and federal-state relations have always been contested. Nonetheless, federalism underwent four distinct phases during four different eras in our constitutional history: post-Founding, post-Civil War, post-New Deal, and from the Rehnquist Court to today.

Enumerated Powers Federalism

In 1787, the Constitution replaced the Articles of Confederation&mdashwhich was essentially a treaty among sovereign states&mdashwith a new constitution ratified by the people themselves in state conventions rather than by state legislatures. The Founders provided the national government with powers it lacked under the Articles and ensured it would be able to act on behalf of the citizenry directly without going through the state governments. But the Founders also thought it important to preserve the states&rsquo power over their own citizens.

The Founders struck this balance by granting the new national government only limited and enumerated powers and leaving the regulation of intrastate commerce to the states. State legislative powers were almost exclusively limited by their own constitutions.

Federalism at the Founding can therefore best be described as &ldquoEnumerated Powers Federalism.&rdquo The national government was conceived as one of limited and enumerated powers. The powers of states were simply everything left over after that enumeration. This is expressed in the first words of Article I, which created Congress: &ldquoAll legislative powers herein granted shall be vested in a Congress of the United States.&rdquo The Tenth Amendment reinforces this principle: &ldquoThe powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.&rdquo State power, then, was protected not by affirmatively shielding state power, but by limiting the ability of the federal government to act in the first place.

Fundamental Rights Federalism

Federalism changed in the wake of the Civil War. The Republicans in the Thirty-Eighth Congress enacted the Thirteenth Amendment, eliminating the power of states to enforce slavery within their borders. But Southern states almost immediately used the rest of their vast police powers to enact Black Codes to oppress the newly freed slaves. Their aim was to come as closely as possible to restoring slavery in everything but name.

In response to this, the Republicans in the Thirty-Ninth Congress used their Thirteenth Amendment enforcement power to enact the Civil Rights Act of 1866. Although they overrode the veto of President Johnson by super-majorities in both houses, some in Congress saw the need to write these protections into the Constitution lest courts question Congress&rsquos power to enact the Civil Rights Act.

The Republicans thus created the Fourteenth Amendment. Section 1 forbade states from violating the fundamental rights of their own citizens, placing new federal constraints on all three branches of state governments. Section 5 granted Congress the power to enforce those constraints. With the passage of the 14 th Amendment, the federal government could now prevent states from violating the privileges and immunities of their citizens depriving anyone of life, liberty, or property without due process and denying anyone equal protection. Following on its heels, a similar provision was enacted to prevent states from denying citizens the right to vote based on their race. The Reconstruction Amendments, taken together, thus ushered in what we can call &ldquoFundamental Rights Federalism.&rdquo

Soon after its enactment, however, the Supreme Court systematically neutered the Fundamental Rights Federalism of the Reconstruction Amendments through such cases as The Slaughter-House Cases (1873), U.S. v. Cruikshank (1875), The Civil Rights Cases (1883), Plessy v. Ferguson (1896), and Giles v. Harris (1903). As a result, the powers accorded to the federal government lay dormant until the Court and Congress took them up again in the early Twentieth Century to protect economic liberties in cases like Lochner v. New York (1905) and Buchanan v. Warley (1917). Eventually, beginning in the 1930s until today, the Court largely withdrew from this area in favor of to protecting so-called &ldquofundamental rights&rdquo and the civil rights of &ldquosuspect classes&rdquo like racial minorities.

With the New Deal, the Court expanded federal regulatory power. Relying primarily on the Commerce Clause and the Necessary and Proper Clause to expand Congress&rsquos reach, the Court effectively brought about the demise of the Enumerated Powers Federalism of the Founding Era. The Court interpreted Article I to give Congress the power to regulate wholly intrastate economic activity that substantially affects interstate commerce. Because the scope and importance of the national economy had vastly outpaced the vision of interstate commerce held by the Founders, the power to regulate anything that affects interstate commerce amounts to the power to regulate almost everything. As a result, the federal government could now regulate in areas once governed exclusively by the states. It could even regulate the states themselves. So what becomes of the states in the wake of New Deal Federalism?

State Sovereignty Federalism

Enter the Rehnquist Court. After William Rehnquist became Chief Justice in 1986, the Court began developing what came to be known as the &ldquoNew Federalism,&rdquo but which in this story could be called &ldquoState Sovereignty Federalism.&rdquo

First came the Court&rsquos so-called Tenth Amendment cases of New York v. United States (1992), Gregory v. Ashcroft (1991), and Printz v. United States (1997). In each of these cases, the Court attempted to carve out a zone of state autonomy that the federal government could not invade. States were thus shielded from federal regulation in a fashion that private parties were not. Then came the Eleventh Amendment cases of Seminole Tribe of Florida v. Florida (1996) and Alden v. Maine (1999), immunizing states from some lawsuits in federal court in order to preserve their sovereign status.

The Rehnquist Court later began tentatively to revive Enumerated Powers Federalism in cases like United States v. Lopez (1995) and United States v. Morrison (2000). Pushing back against New Deal Federalism, the Court continued to license federal regulation of wholly intrastate economic activity that had a substantial effect on interstate commerce while drawing a line at the regulation of noneconomic intrastate activity.

The Roberts Court has now taken up the mantle. Like its predecessor, it has continued both to (1) invoke state sovereignty to preserve a zone of state autonomy, and (2) build out a modern version of enumerated powers federalism by interpreting the New Deal federalism as the &ldquohigh water mark&rdquo of federal power such that federal powers cannot be expanded still further without a limiting principle. The first strategy places external limits on Congress&rsquos power, marking where Congress&rsquos power ends by identifying where state power begins and using sovereignty as a touchstone. The second derives those limits internally without reference to the states. But both are efforts to cut back on the expansive view of federal power that had evolved in the wake of the New Deal and thereby preserve a zone of autonomy for the states.

The Powers of Congress to tax - History

Members of the Constitutional Convention were divided about how powerful the new central government should be. To avoid the rise of tyrannical government, the Constitution carefully grants certain powers to Congress, reserving all other powers to the states. These powers are listed in Article I, Section 8. Look at this section in Note 5.25 "Hyperlink: The Powers of Congress" and notice how detailed these powers are.

The list begins with monetary matters, an issue of great concern at the time because the prior government was bankrupt and states regulated their own money supply. The Congress therefore has the power to borrow money, lay and collect taxes, regulate commerce (the Commerce Clause The power granted to Congress to regulate foreign and domestic commerce. ), establish a uniform law on bankruptcy and naturalization The process and procedure to become a citizen. , make money (currency) and establish its value, punish the counterfeiting of U.S. money, and establish a uniform system of weights and measures. The list then moves on to aspirational ideals for the young new country to strive toward. Congress has the power to establish post offices and post roads and to protect intellectual property in copyrights and patents. Next, the list turns to Congress’s adjudicative powers: to create lower courts under the Supreme Court created in Article III and to define crimes committed on the “high seas” and against the “law of nations.” Congress is also given fiscal responsibility over the armed forces and navy (note there is, of course, no mention of an air force) and the power to provide oversight to the militia. Then, to help Congress with carrying out these powers, Article I, Section 8 provides that the states may cede to Congress a district, not to exceed ten square miles, that will become the seat of government, and to exercise exclusive legislative authority over this district.

The scope of power granted under Article I, Section 8 is the subject of much debate among legal scholars. The clause granting Congress the power to regulate commerce is particularly troublesome. There is very little debate about the power of Congress to regulate foreign trade. This power is explicit, total, and exclusive. If Congress wanted to ban all imports and exports into and out of the United States, for example, it could legitimately do so. Indeed, Congress routinely uses economic trade sanctions against “rogue” nations such as Cuba and North Korea as a means of economic warfare to try to bring about regime change. Even in the case of friendly allies such as Canada, Mexico, and the European Union, Congress routinely engages in trade regulations that restrict or distort foreign trade. Since this power is exclusive to Congress, state attempts to regulate foreign commerce are invalid. Oregon, for example, cannot ban Oregon companies from exporting to Mexico or establish a free trade zone with duty-free imports with China.

There is more disagreement about Congress’s power to regulate domestic commerce. Notice how Article I, Section 8 is structured. Many scholars believe that this list is complete and exhaustive, since it lists all the powers the Founding Fathers wanted to give Congress at the time. The idea, they argue, was to create powerful and limited government, leaving the states room to govern in all other areas. As evidence, these scholars point to the structure of the list and the high level of detail provided (such as specific crimes to be made punishable and the square mile limitation for the seat of government). Other scholars believe that the list should be interpreted more broadly and that the language granting Congress the power to “make all laws necessary and proper” to carry out the enumerated powers demonstrates the Founding Fathers’ desire for a more flexible interpretation, to allow Congress the power to react to needs and challenges not foreseeable at the time the clause was drafted.

In the early part of the country’s history, the first view held firm sway, and together courts and Congress carefully observed the constitutional limits to the growth of federal government power. If you consider our modern federal government, however, it’s obvious that the second view is now more prevalent. Today, the federal government does a lot more than what is enumerated on the list in Article I, Section 8. From regulating educational standards, to defining clean air and water, to outlawing workplace discrimination, to licensing portions of the electromagnetic spectrum for cell phone and digital television providers to use, it’s clear that if a member of the Constitutional Convention were to travel forward in time, he would be shocked at both the pace of progress and the size and power of the federal government. How did our country’s view of congressional power evolve over time?

The answer can be traced to the Great Depression. In response to unprecedented economic distress, President Roosevelt sought to redefine the very nature of the employer/employee relationship. He, along with Congress, enacted legislation that established a minimum hourly wage, set maximum weekly working hours, established workplace safety rules, outlawed child labor, and provided for a safety net to protect older and disabled workers. These laws initially ran into stiff opposition at the Supreme Court. The justices at the time clung to a more formalistic reading of Article I, Section 8 and saw the employer/employee relationship as one governed by freedom of contract. In this view, if a worker wanted to work and an employer was willing to provide that work, then the government should not interfere with that contract. Thus, early portions of the New Deal were struck down as unconstitutional under the Commerce Clause.

After President Roosevelt proposed his court-packing plan, leading one of the swing votes on the Supreme Court to change his vote to begin upholding the New Deal, the barriers surrounding the interpretation of the Commerce Clause came crashing down. Courts have now adopted a very flexible reading of the Commerce Clause. As long as Congress makes reasonable findings that a certain activity has some sort of effect on interstate commerce, Congress can regulate that activity.

This broad interpretation of the Commerce Clause has been challenged repeatedly. In 1964, for example, Congress passed a broad and sweeping Civil Rights Act, prohibiting discrimination against citizens on the basis of race, color, national origin, and sex. Congress relied on its power under the Commerce Clause to pass this legislation. That same year, the Heart of Atlanta Motel in Georgia (Figure 5.3 "Heart of Atlanta Motel") filed a federal lawsuit seeking to overturn the Civil Rights Act as unconstitutional, arguing that Congress lacked the authority under the Commerce Clause to pass the law. The Supreme Court held the law to be constitutional, finding that since 75 percent of the motel’s clients came from out of state and since the motel was located near Interstates 75 and 85, the business had an “effect” on interstate commerce. Heart of Atlanta Motel v. United States, 379 U.S. 241 (1964). Subsequent civil rights legislation, including the important Americans with Disabilities Act, is also grounded in congressional authority to regulate interstate commerce.

Figure 5.3 Heart of Atlanta Motel

Source: Photo courtesy of Georgia State University, Special Collections of the University Library,

In the late 1990s, several curious decisions by the conservative wing of the Supreme Court led some observers to wonder if the days of virtually unfettered authority by Congress to regulate under the Commerce Clause were coming to an end. Judicial conservatives, especially the late Chief Justice Rehnquist, have always been somewhat uncomfortable with the broad reading of the Commerce Clause, worried that it has led to a runaway federal government many times bigger than what the Founding Fathers intended. In a 1995 case, the Supreme Court held that the 1990 Gun-Free School Zones Act was unconstitutional. The law prohibited the possession of weapons in schools and was based on a congressional finding that possession of firearms in educational settings would lead to violent crime, which in turn affects general economic conditions by causing damage and raising insurance costs and by limiting travel to and through unsafe areas. Students intimidated by a violent educational setting would also be affected, learning less and leading to a weaker educational system and economy. By a 5–4 margin, the Supreme Court found these arguments unpersuasive and overturned the law, holding that Congress lacked authority under the Commerce Clause to regulate the carrying of handguns into schools. United States v. Lopez, 514 U.S. 549 (1995). Then, five years later, the Supreme Court overturned a portion of the 1994 Violence Against Women Act, which gave a woman the right to sue her attacker in federal court for civil damages, holding that the effects of violence against women were too “attenuated” to be valid under the Commerce Clause. United States v. Morris, 529 U.S. 598 (2000). Any expected revolution in the scope of Congress’s authority failed to materialize, however, and these two cases are probably aberrations rather than predictors of where the Court is heading on this topic.

While the Constitution limits the federal government’s powers to those enumerated in Article I, Section 8, the states also have broad lawmaking authority. These powers stem from the states’ police power The general power of states to regulate for the health, safety, and general welfare of the public. , which permits states to regulate broadly to protect and promote the public order, health, safety, morals, and general welfare. You’ve probably experienced this yourself. Different states have different speed limits, for example. Some states permit the sale of alcohol on Sundays, while others prohibit it. Some states permit casino gambling, while others do not. A few states permit same-sex marriage, while many do not. Some states prohibit smoking in bars and restaurants, including North Carolina, home to the nation’s tobacco industry. In California, an attempt to rein in obesity resulted in a state law to require calorie counts on restaurant menus and a ban on the use of trans fats. In Texas, teenagers must have parental permission to use tanning beds at a salon. Massachusetts bans dog racing. Many states are implementing bans on texting while driving.

Hyperlink: How Assisted Suicide Ruling Affects Doctors’ Work

In 1994 Oregon voters approved the country’s first physician-assisted suicide law, the Oregon Death with Dignity Act. The law permits certain patients to voluntarily hasten death by taking a lethal dose of prescription medication. To meet the law’s requirements, the patient must be terminally ill with less than six months to live, must be informed and voluntarily request the medication, must be able to consume the medication by himself or herself, must be referred to counseling, and must have the terminal diagnosis confirmed by a second doctor. Many patients, fearing a painful or torturous natural death, obtain the medication and never take it, but some do. In 2001 Attorney General John Ashcroft issued a rule interpreting the federal Controlled Substances Act as prohibiting any physician from prescribing medication under the Death with Dignity Act, subjecting any doctor who did so to federal prosecution. In a 6–3 decision, the Supreme Court decided that the Controlled Substances Act did not grant the attorney general the authority to override a state standard for regulating medicine. Gonzalez v. Oregon, 546 U.S. 243 (2006). In doing so, the Court held that the state police power is entitled to greater deference, in this case, than Congress’s powers under the Commerce Clause. Listen to the National Public Radio story for one physician’s account of how the Death with Dignity Act has affected his practice.

The Oregon Death with Dignity Act case illustrates how a state, in exercising its police power, can actually grant more civil rights to its citizens than the federal government does or wishes to. Similarly, states that have legalized same-sex marriage have done so under their police powers, which is permissible as long as the exercise of police power does not violate the federal Constitution. Generally, this means the state legislation must be reasonable and applied fairly rather than arbitrarily. Additionally, a critical limitation on the state police power is that it cannot interfere with Congress’s power to regulate interstate commerce. This concept is known as the dormant commerce clause The concept that restricts states from placing an undue burden on interstate commerce. because it restricts the states’ abilities to regulate commerce, rather than the federal government’s.

A state law that discriminates against out-of-state commerce, or places an undue burden A constitutional test created by the Supreme Court to determine a law’s validity. on interstate commerce, would violate the dormant commerce clause. For example, if a state required out-of-state corporations to pay a higher tax or fee than an in-state corporation, that would be unconstitutional. A state that required health and safety inspections of out-of-state, but not in-state, produce or goods would be unconstitutional. In 2005 the Supreme Court held that state restrictions prohibiting out-of-state wineries from selling directly to consumers in-state was unconstitutional. Granholm v. Heald, 544 U.S. 460 (2005). Federal courts have repeatedly held that state attempts to regulate Internet content (typically to prevent pornography) are unduly burdensome on interstate commerce and therefore unconstitutional. Note, however, that this prohibition against out-of-state discrimination does not prevent a state from exercising its police power to protect state citizens, as long as the power is exercised evenly and equally. If a state wanted to weigh trucks on highways to ensure they did not exceed maximum weight rules, for example, that action would be permissible even if the trucks came from out of state, as long as the requirement applied equally to all trucks on that state’s highways.

In addition to the power to regulate commerce, the Constitution places two critical powers with Congress: the taxing power The power granted to Congress to raise revenue through taxation. and the power to spend the taxes it collects. The taxing power is a broad one, and the Supreme Court has not overturned a tax passed by Congress in nearly a century. As long as the tax bears some reasonable relationship to generating revenue, the tax is valid.

States are also permitted to tax, but only if the activity taxed has a nexus A sufficient connection to justify state taxation. to the state. A transaction (such as a sale) that takes place inside the state would create a nexus for sales tax to attach. Working typically creates a nexus for state or local income tax to apply, and owning real property creates a nexus for real estate tax to apply. What happens, however, if a state’s citizen purchases goods from a seller out of state? Traditionally, buyers do not pay sales tax to the government directly—rather, they pay the sales tax to the seller, who collects the tax on behalf of the government and turns it over to the government at regular intervals. In the past, mail-order catalog sellers from out of state would not collect sales tax in states where they don’t have a physical presence. As the popularity of e-commerce has skyrocketed, more and more states are reexamining how to tax transactions from out-of-state sellers by compelling those sellers to collect the applicable sales tax. Some states are so desperate they are starting to look for a nexus anywhere they can. In New York, for example, the legislature passed a law requiring to collect sales tax from New York residents based on the presence of New York citizens who link to Amazon’s Web site in turn for a commission generated by those links.

Congress also has the power to “pay the debts and provide for the common defense and general welfare.” This spending power Congress’s power to spend public revenue to meet broad public objectives. is considered very broad. Courts have interpreted this power to mean that Congress can spend money not only to carry out its powers under Article I, Section 8 but also to promote any other objective, as long as it does not violate the Constitution or Bill of Rights. For example, in 1984 Congress passed the National Minimum Drinking Age Act, which required states to adopt a minimum age of twenty-one for the purchase and possession of alcohol. If a state did not adopt the age-twenty-one requirement, Congress would withhold federal highway funds from that state to repair and build new roads. One by one, states began adopting age twenty-one as the minimum drinking age, even though the age requirement would typically be a matter of state police power. In a challenge by South Dakota, which wanted to keep nineteen as the minimum drinking age, the Supreme Court upheld Congress’s use of withholding funds to force the states to raise the minimum drinking age. South Dakota v. Dole, 483 U.S. 203 (1987). Congress has used the spending power to coerce states to adopt a fifty-five-mile-per-hour speed limit (rescinded by the Clinton administration) and to lower the driving under the influence (DUI) blood alcohol level limit from 0.10 in most states to 0.08.

Key Takeaways

Article I, Section 8 of the Constitution grants certain specific powers to Congress. The power to regulate commerce is one of these powers, and the power of foreign commerce is explicit, total, and exclusive. During the Great Depression, the Supreme Court greatly expanded the interpretation of Congress’s ability to regulate domestic interstate commerce, and this expansion led to congressional authority to regulate virtually all human activity within the United States, with very few limited exceptions. This authority extends to civil rights, where Congress has passed several key pieces of legislation, including the Civil Rights Act of 1964 and the Americans with Disabilities Act, under the Commerce Clause. Attempts by judicial conservatives to circumscribe the power of the Commerce Clause appear to have failed for now. Unlike the federal government, states have broad police powers to regulate for the health, safety, and moral well-being of their citizens. The exercise of these police powers cannot violate the federal Constitution and, importantly, cannot violate the dormant commerce clause by discriminating against or placing an undue burden on interstate commerce. The power to tax is broad, and as long as a tax bears a reasonable relationship to raising revenue, the tax is upheld as constitutional. The power to spend is similarly broad, and Congress can spend funds to achieve broad objectives beyond its enumerated powers.

Constitutional Powers

Congress was granted tremendous political power by the founders. These powers are listed primarily in Article I, Section 8, of the Constitution, which states that Congress has broad discretion to “provide for the common defense and general welfare of the United States.” To achieve this end, Congress has the authority to make and implement laws.

The Constitution lists a number of specific powers entrusted to Congress. These include responsibility for the nation’s budget and commerce, such as the power to lay and collect taxes, to pay the debts, to regulate commerce with foreign nations and among the states, to coin money, and to establish post offices. Congress is assigned the power to declare war and to raise an army and navy. Congress has the right to propose amendments to the Constitution and to create new states.

Figure 12.1 Constitutional Powers of Congress

Certain powers are granted specifically to the House, such as the power to initiate all tax and spending bills. While the Senate cannot propose such bills, it can accept, reject, or amend them. The Senate has certain authority not vested in the House. High-level presidential nominees, such as cabinet officers, Supreme Court justices, and ambassadors, must gain Senate approval. The Senate also must concur in treaties with foreign countries.

The final paragraph of Article I, Section 8, grants to Congress the power “to make all laws which shall be necessary and proper for carrying into execution the foregoing powers.” This provision is known as the elastic clause The constitutional provision that Congress shall make all laws that are “necessary and proper” for executing their powers, which has been used to expand its authority also known as the “necessary and proper” clause. because it is used to expand the powers of Congress, especially when national laws come into conflict with state laws. Legislation making it a federal crime to transport a kidnapped person across state lines was justified on the basis that the elastic clause allowed Congress to apply its power to regulate commerce in this situation. The reach of congressional power is explored on the website of the University of Missouri–Kansas City Law School.

Key Takeaways

Article I of the Constitution establishes Congress as the legislative branch of government with broad powers to provide for the “common defense and general welfare of the United States,” along with specific powers in important areas of domestic and foreign affairs. Certain powers, such as the ability to initiate taxing and spending bills, rest exclusively with the House of Representatives. Other powers, including the approval of presidential appointments, lie solely with the Senate. The powers of Congress have been extended through the elastic clause of the Constitution, which states that Congress can make all laws that are “necessary and proper” for carrying out its duties.

3 Beyond National Borders

Under the Articles of Confederation, the states had to defer to Congress when it came to declaring war, appointing ambassadors, entering into treaties and alliances with other countries and other foreign affairs issues. It was also up to Congress to administer the formally British lands to the west of the original 13 states, which typically entailed negotiating with Native Americans. Due to poor cooperation from the states, however, the federal government had a hard time exercising many of these powers. The states, for example, refused to fully honor the 1783 Treaty of Paris, which allowed British merchants to demand payment of debts incurred prior to the war. The state of Georgia pursued an independent foreign policy toward Spanish Florida, trying to occupy disputed territories and threatening war if Spain didn't take action to prevent Indian attacks and to keep Florida from becoming a refuge for escaped slaves

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