Child Labor Tax Case
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| Child Labor Tax Case | ||||||||||||
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 Supreme Court of the United States |
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| Argued March 7 – 8, 1922 Decided May 15, 1922 |
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| Holding | ||||||||||||
| Congress improperly penalized employers for using child labor. | ||||||||||||
| Court membership | ||||||||||||
| Chief Justice: William Howard Taft Associate Justices: Joseph McKenna, Oliver Wendell Holmes, Jr., William R. Day, Willis Van Devanter, Mahlon Pitney, James Clark McReynolds, Louis Brandeis, John Hessin Clarke |
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| Case opinions | ||||||||||||
| Majority by: Taft Joined by: McKenna, Holmes, Day, Van Devanter, Pitney, McReynolds, Brandeis Dissent by: Clarke |
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Child Labor Tax Case (docket title Bailey v. Drexel Furniture Co.), 259 U.S. 20 (1922)[1], 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.
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[edit] 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.
[edit] 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.
[edit] 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?
[edit] 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.
[edit] 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.
[edit] Implications
The decision in Drexel was a reversal of the Supreme Court’s position on excise taxes since the early 1800s. This was a 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 became unnecessary because many states passed their own child labor laws.
