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Article I, Section 8, Clause 1 of the United States Constitution, is known as the Taxing and Spending Clause, the General Welfare Clause, the Uniformity Clause and the Welfare Clause.

Text

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

Appropriations of revenue for the general welfare

While both disciplines of thought agree that the taxing and spending clause delegated to Congress a general power of taxation--i.e. to lay any tax they found appropriate in order to raise revenues--two theories of the spending power have been advocated by constitutional scholars:

(A) the narrower Madisonian view that spending must be directly tied to one of the other specifically enumerated powers, such as regulating interstate or foreign commerce, or providing for the military; and

(B) the broader Hamiltonian view that spending, so long as it is deemed necessary and proper and tangentally related to another enumerated power, is a separately independent power that Congress may exercise to benefit the general welfare.

However, the phrasing for the power to provide "for the common defense of the general welfare" was copied from Articles III and VIII of the immediately earlier Articles of Confederation, where it was established independent of other powers:

"III. The said States hereby severally enter into a firm league of friendship with each other, for their common defense, the security of their liberties, and their mutual and general welfare, binding themselves to assist each other, against all force offered to, or attacks made upon them, or any of them, on account of religion, sovereignty, trade, or any other pretense whatever.... VIII.... expenses that shall be incurred for the common defense or general welfare, and allowed by the United States in Congress assembled, shall be defrayed out of a common treasury."

At one point in U.S. history, the United States Supreme Court had imposed a narrow interpretation on the Clause, holding in Bailey v. Drexel Furniture Co., 259 U.S. 20 (1922), that a tax on child labor was an impermissible attempt to regulate commerce beyond that Court's equally narrow interpretation of the Commerce Clause.

This view was later overturned in United States v. Butler, 297 U.S. 1 (1936). In that case the Court held that the power to tax and spend is an independent power; that is, that the Taxing and Spending Clause gives Congress power it might not have anywhere else. The tax imposed in that case was nevertheless held unconstitutional as a violation of the Tenth Amendment reservation of power to the states.

The modern Supreme Court has interpreted this clause to give Congress a plenary power to impose taxes and to spend money for the general welfare, including the power to force the states to abide by national standards by threatening to withhold federal funds. See South Dakota v. Dole, 483 U.S. 203 (1987).

Limitation on taxes: Apportionment of some direct taxes

Other language in the Constitution expressly limits the taxing and spending power. Article I, Section 9 has several clauses so addressed. Clause 4 states:

No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.

A tax (if any) subject to the apportionment rule would have to be imposed among the states in proportion to each state's population. This means that the dollar amount of such taxes imposed on the taxpayers within any given state would be required to bear an arithmetical relationship to the total dollar amount of such taxes imposed in the entire nation that would be equal to the ratio of that state's population to the total population of the nation.

Until 1895, all income taxes were deemed to be indirect taxes, or excises. Direct taxes were limited to property taxes "imposed by reason of ownership," and to capitations (head taxes). Because some income taxes (taxes on income from property, such as interest, dividends, and rent) were, however, treated as direct taxes in the 1895 U.S. Supreme Court decision in Pollock v. Farmers' Loan & Trust Co., the prohibition on unapportioned direct taxes was later eliminated with respect to income taxes by the ratification of the Sixteenth Amendment. In 1916 in the case of Brushaber v. Union Pacific Railroad, the U.S. Supreme Court ruled that under the Sixteenth Amendment, income taxes were constitutional even though unapportioned. In subsequent cases, the courts have interpreted the Sixteenth Amendment and the Brushaber decision as standing for the rule that the Amendment allows a direct tax on "wages, salaries, commissions, etc. without apportionment."

Limitation on taxes: No taxes and duties on exports

Article I, Section 9, Clause 5 prohibits taxes and duties on exports:

No tax or duty shall be laid on articles exported from any state.

Regarding taxes on exports, the 0.125% harbor maintenance tax on the value of commercial cargo involved in a taxed port use under 26 U.S.C. § 4461 was unanimously ruled unconstitutional in the case of United States v. United States Shoe Corp., 523 U.S. 360, 118 S. Ct. 1290, 98-1 U.S. Tax Cas. (CCH) paragr. 70,091 (1998). The government had argued that the tax was only a "user fee." The Court ruled that it was an unconstitutional tax on exports.

Limitation on spending

Article I, Section 9, Clause 7 imposes accountability on Congressional spending:

No money shall be drawn from the treasury, but in consequence of appropriations made by law; and a regular statement and account of receipts and expenditures of all public money shall be published from time to time.

Notes

1. The Federalist Papers No. 41 General View of the Powers Conferred by The Constitution
2. Letter to the House of Representatives, James Madison,Veto of federal public works bill, March 3, 1817
3. Parker v. Commissioner, 724 F.2d 469, 84-1 U.S. Tax Cas. (CCH) paragr. 9209 (5th Cir. 1984) (closing parenthesis in original has been omitted).

Footnotes

• 483 U.S. 203 (Text of the opinion from Findlaw)
• 259 U.S. 20 (Text of the opinion from Findlaw)
• 297 U.S. 1 (Text of the opinion from Findlaw)

• United States Constitution
• Legislative branch of the United States government
• Legal history of the United States
• Taxation in the United States