Saturday, August 14, 2010

Social Security: Questions about its Constitutionality on its Diamond Anniversary

The Social Security Act of 1935, spear-headed by Franklin Delano Roosevelt, turns seventy-five today. 


[image: President Roosevelt signing the Social Security Act, via].

But as Justice Cardozo said in 1937:

The Social Security Act (Act of August 14, 1935, c. 531, 49 Stat. 620, 42 U.S.C. c. 7, (Supp.)), is challenged once again.

Although the Court upheld the Act in the 1937 cases of  Helvering v. Davis (which began with Cardozo's statement above) and in Steward Machine Company v. Collector of Internal Revenue Service, there are those who continue to argue it is unconstitutional, including Republican Congressperson John Shadegg. 

In service of that conclusion, Shadegg has sponsored the Enumerated Powers bill, which provides:

Each Act of Congress shall contain a concise and definite statement of the constitutional authority relied upon for the enactment of each portion of that Act. The failure to comply with this section shall give rise to a point of order in either House of Congress. The availability of this point of order does not affect any other available relief.

Such a requirement does not seem problematic at first blush, although the Court could presumably find that Congress did not have power under the rational Congress articulated but nevertheless possessed authority pursuant to a different constitutional power.


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The Supreme Court, under a threat of legislation from the Roosevelt Administration to vastly alter the structure of the Supreme Court and Federal Courts, commonly known as the Court Packing Scheme that could have destroyed the impartiality of the judiciary branch, decided to streamline much of the constitutionally questionable legislation of the New Deal.

The following is an excerpt from the case Charles C. Steward Mach. Co. v. Davis, 301 U.S. 548 (1937) referring to taxes imposed as an excise on the employment relation between an employee and employer:

First: The tax, which is described in the statute as an excise, is laid with uniformity throughout the United States as a duty, an impost, or an excise upon the relation of employment.

1. We are told that the relation of employment is one so essential to the pursuit of happiness that it may not be burdened with a tax. Appeal is made to history. From the precedents of colonial days, we are supplied with illustrations of excises common in the colonies. They are said to have been bound up with the enjoyment of particular commodities. Appeal is also made to principle or the analysis of concepts. An excise, we are told, imports a tax upon a privilege; employment, it is said, is a right, not a privilege, from which it follows that employment is not subject to an excise. Neither the one appeal nor the other leads to the desired goal.

As to the argument from history: Doubtless there were many excises in colonial days and later that were associated, more or less intimately, with the enjoyment or the use of property. This would not prove, even if no others were then known, that the forms then accepted were not subject to enlargement. But in truth other excises were known, and known since early times. Thus in 1695, Parliament passed an act which granted ‘to His Majesty certain Rates and Duties upon Marriages, Births and Burials,’ all for the purpose of ‘carrying on the War against France with Vigour.’ No commodity was affected there. The industry of counsel has supplied us with an apter illustration where the tax was not different in substance from the one now challenged as invalid. In 1777, before our Constitutional Convention, Parliament laid upon employers an annual ‘duty’ of 21 shillings for ‘every male Servant’ employed in stated forms of work. The point is made as a distinction that a tax upon the use of male servants was thought of as a tax upon a luxury. It did not touch employments in husbandry or business. This is to throw over the argument that historically an excise is a tax upon the enjoyment of commodities. But the attempted distinction, whatever may be thought of its validity, is inapplicable to a statute of Virginia passed in 1780. There a tax of 3 pounds, 6 shillings, and 8 pence was to be paid for every male tithable above the age of twenty-one years (with stated exceptions), and a like tax for ‘every white servant whatsoever, except apprentices under the age of twenty one years.’ Our colonial forbears knew more about ways of taxing than some of their descendants seem to be willing to concede.

The Supreme Court concluded that natural rights are as much subject to taxation as rights of less importance. Also, they concluded that “Excise”, which Congress has power to impose, is not limited to vocations or activities that may be prohibited altogether or to those that are the outcome of a franchise, but extends to vocations or activities pursued as of common right.

Tea Party activists argue that there is a disctinction between natural rights and privileges. Natural Rights include birth, breathing clean air, finding and eating food. The importance is that only privileges may be taxes, such as licenses to do business, trade, etc. Natural rights should not be subject to tax. This would empower the federal government to tax anything and everything including the clean air you breath and apple tree you grow for food. The rationale for the Clean Air Tax would be that the government has expended vast amounts of funds on the Environmental Protection Agency and other clean air initiatives, which the general public benefits from in the form of cleaner air and thus healthier lives. This would be a public service subject to taxation. They could also argue that picking an apple from your apple tree is subject to taxation on the theory that the production and consumption of the apple under the protection of the laws of the United States entitles the government to tax said consumption. In fact, they have expanded on this topic in tax law and could argue it was an "accession to wealth" to have your own apple producing tree, and that each apple eaten is, by definition, consumption, which is an event subject to taxation.

Unfortunately, this case is established case law and highly unlikely to be subject to an overturn as it would undue nearly 50 years of legislation. However, considering that the federal government is facing the worst financial crisis since the birth of our nation, it would not surprise me if it were overturned.

I think the point of all of this is that taxes are getting out of control. And looking back in time and some of the things we missed, it may very well be that the decision was, in fact, unconstitutional and potentially subject to being overturned. However, looking at the modern benefit of unemployment taxes and the benefits it has had during economic recessions, it is highly unlikely to be overturned without widespead public discontent of dangerous proportions.

Posted by: John Anthony Castro | Sep 14, 2010 10:22:10 AM

But then again, I'm still just a student and learning...

Posted by: John Anthony Castro | Sep 14, 2010 10:24:11 AM

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