Article 1, Section 8, Clause 1 — Taxes To Regulate Conduct

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Article I, Section 8, Clause 1:

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; . . .

Congress has broad discretion in selecting the “measure and objects” of taxation, and may use its taxing power to regulate private conduct.[1](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn1art1 " Flint v. Stone Tracy Co., 220 U.S. 107, 167 (1911). ") For instance, the Supreme Court has sustained regulations on the contents of taxed packaged goods[2](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn2art1 " Felsenheld v. United States, 186 U.S. 126 (1902). ") and the packaging of taxed oleomargarine,[3](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn3art1 " In re Kollock, 165 U.S. 526 (1897). ") which were ostensibly designed to prevent fraud in the collection of the tax. It has also upheld measures taxing drugs[4](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn4art1 " United States v. Doremus, 249 U.S. 86 (1919); cf. Nigro v. United States, 276 U.S. 332 (1928). ") and firearms,[5](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn5art1 " Sonzinsky v. United States, 300 U.S. 506 (1937). ") which prescribed rigorous restrictions under which such articles could be sold or transferred, and imposed heavy penalties upon persons dealing with them in any other way.

The Court has not invalidated a tax with a clear regulatory effect solely because Congress was motivated by a regulatory purpose.[6](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn6art1 " Without casting doubt on the ability of Congress to regulate or punish through its taxing power, the Court has overruled United States v. Kahriger, 345 U.S. 22 (1953), and Lewis v. United States, 348 U.S. 419 (1955), to the extent that the opinions precluded individuals from asserting their Fifth Amendment privilege from self-incrimination as a defense to prosecution for violations of tax statutory schemes requiring registration and information reporting. Marchetti v. United States, 390 U.S. 39 (1968); see Leary v. United States, 395 U.S. 6 (1969); Grosso v. United States, 390 U.S. 62 (1968); Haynes v. United States, 390 U.S. 85 (1968). ") Even where a tax is coupled with regulations that have no relation to the efficient collection of the tax, and no other purpose appears on the face of the statute, the Court has refused to inquire into the motives of the lawmakers and has sustained the tax despite its prohibitive proportions.[7](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn7art1 " McCray v. United States, 195 U.S. 27 (1904); see United States v. Doremus, 249 U.S. 86 (1919); Patton v. Brady, 184 U.S. 608 (1902). ") The Court has stated:

It is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. . . . The principle applies even though the revenue obtained is obviously negligible . . . or the revenue purpose of the tax may be secondary.[8](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn8art1 " United States v. Sanchez, 340 U.S. at 44 (1950). ")

In some cases, however, the structure of a taxation scheme is such as to suggest that Congress actually intends to regulate under a separate constitutional authority.[9](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn9art1 " Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 393 (1940). ") As long as such separate authority is available to Congress, the imposition of a tax as a penalty for such regulation is valid.[10](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn10art1 " Id.; see also Edye v. Robertson (Head Money Cases), 112 U.S. 580 (1884). ") In National Federation of Independent Business v. Sebelius (NFIB),[11](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn11art1 " 567 U.S. 519 (2012). ") the Court reaffirmed that it construes the Constitution to prohibit Congress from using the taxing power to enact taxes that are functionally regulatory penalties as a means of regulating in areas that Congress cannot regulate directly through a separate constitutional authority.[12](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn12art1 " Id. at 572–73. ") The Court has invalidated a few federal taxes on this basis.[13](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn13art1 " See, e.g., United States v. Butler (Child Labor Tax Case), 297 U.S. 1, 68–69 (1936); United States v. Constantine, 296 U.S. 287, 293–94 (1935); Bailey v. Drexel Furniture Co. (Child Labor Tax Case), 259 U.S. 20, 37 (1922). ")

Discerning whether Congress, in passing a regulation that purports to be under the taxing authority, intends to exercise a separate constitutional authority, requires evaluation of a number of factors.[14](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn14art1 " Hill v. Wallace, 259 U.S. 44 (1922); see also Helwig v. United States, 188 U.S. 605 (1903). ") Under Bailey v. Drexel Furniture Co.,[15](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn15art1 " 259 U.S. 20. ") decided in 1922, the Court, which had previously rejected a federal law regulating child labor as being outside of the Commerce Clause,[16](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn16art1 " Hammer v. Dagenhart, 247 U.S. 251 (1918), overruled by United States v. Darby, 312 U.S. 100 (1941). ") also rejected a 10% tax on the net profits of companies who knowingly employed child labor. The Court invalidated the child labor tax as a penalty exceeding Congress’s constitutional authority and aiming to achieve a regulatory purpose “plainly within” the exclusive powers reserved to the states under the Tenth Amendment .[17](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn17art1 " Drexel Furniture Co., 259 U.S. at 37. ") Four characteristics of the tax led the Court to conclude the tax was a penalty. First, the Court noted that the law in question set forth a specific and detailed regulatory scheme—including the ages, industry, and number of hours allowed—establishing when employment of underage youth would incur taxation.[18](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn18art1 " Id. at 36. ") Second, the tax was not commensurate with the degree of the infraction—i.e., a small departure from the prescribed course of conduct could feasibly lead to the 10% tax on net profits.[19](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn19art1 " Id. ") Third, the tax had a scienter requirement, so that the employer had to know that the child was below a specified age in order to incur taxation.[20](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn20art1 " Id. at 36–37. ") Fourth, the statute made the businesses subject to inspection by officers of the Secretary of Labor, positions not traditionally charged with the enforcement and collection of taxes.[21](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn21art1 " Id. at 37. ") The Court distinguished the child labor tax from acceptable regulatory taxes by emphasizing that in those cases Congress had authority outside the taxing power to regulate those activities.[22](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn22art1 " Id. at 40–44. ")

In the first half of the twentieth century, the Court continued to strike down federal taxes on the ground that they infringed on regulatory powers reserved to the states under the Tenth Amendment because Congress did not have separate constitutional authority to regulate the subject matter at issue. In 1935, in United States v. Constantine,[23](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn23art1 " 296 U.S. 287 (1935). ") the Court struck down a federal excise tax on liquor dealers operating in violation of state law. The Court construed the Constitution to prohibit Congress from imposing the excise tax when the purpose of the tax was to punish rather than raise revenue.[24](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn24art1 " Id. at 294. ") The majority concluded that Congress exceeded its authority by penalizing liquor dealers for violating state law, because such regulation was reserved, under the Tenth Amendment , to the states.[25](https://www.law.cornell.edu/constitution-conan/article-1/section-8/clause-1/taxes-to-regulate-conduct#fn25art1 " Id. at 296. ") Congress lacked authority to impose a penalty on liquor dealers following the repeal of the Eighteenth Amendment, which had established the national prohibition on alcohol.[26](https://www.law.cornell.edu/constitution-conan