297 U.S. 1 (1936)
The Agricultural Adjustment Act was enacted on May 12, 1933, and amended on August 24, 1935.1 It declared that an economic emergency existed due to disparity between prices of agricultural and other commodities.2 This disparity had affected transactions in agricultural commodities with a national public interest and burdened normal channels of commerce.3
The statute directed the Secretary of Agriculture to ascertain parity prices for basic commodities such as cotton, wheat, and hogs using specified base periods.4 It authorized the Secretary to enter into agreements with producers to reduce acreage or production.5 The Secretary was also authorized to make rental or benefit payments from the proceeds of taxes levied on the first processing of the commodities.6
The Act imposed a processing tax upon the first domestic processing of the commodity.7 The rate was fixed by the Secretary at an amount believed to equalize the current average farm price and the fair exchange value.8 The tax was to be paid by the processor.9 The entire revenue was appropriated for rental and benefit payments to farmers who reduced acreage or production, along with administrative expenses and related uses.10
On July 14, 1933, the Secretary proclaimed that rental and benefit payments should be made with respect to cotton.11 The marketing year was fixed to begin August 1, 1933.12 The rates of processing and floor taxes on cotton were calculated and fixed in accordance with the terms of the Act.13 The United States presented a claim to the respondents as receivers of the Hoosac Mills Corporation for processing and floor taxes on cotton levied under the Act.14 The respondents brought suit to recover amounts paid as processing taxes upon the processing of hogs under the statute and resisted the claim for cotton taxes.15 The District Court found the taxes valid and ordered them paid.16 The Circuit Court of Appeals for the First Circuit reversed the District Court's order.17 The Supreme Court granted a writ of certiorari to review the decree of the Circuit Court of Appeals.18
Whether the Agricultural Adjustment Act of 1933 is within the powers of Congress under Article I, Section 8 of the Constitution?19
The power to lay and collect taxes to provide for the general welfare is not a separate and distinct power.20 It is a means to an end that must be within the enumerated powers of the federal government.21 Congress may not use the taxing and spending power to regulate matters such as agricultural production that are reserved to the states by the Tenth Amendment.22
No. The Agricultural Adjustment Act of 1933 declares an economic emergency due to price disparity.23 It authorizes the Secretary of Agriculture to enter into agreements with producers to reduce acreage or production.24 It makes rental or benefit payments from the proceeds of processing taxes levied on the first domestic processing of commodities such as cotton and hogs.25 The entire revenue from the tax is appropriated for those payments and related uses.26
This makes the tax and expenditures integral parts of a statutory plan to regulate and control agricultural production, a matter beyond the powers delegated to the federal government and reserved to the states.27
The Agricultural Adjustment Act of 1933 is not within the powers of Congress.28
Related opinions on this issue
Joined by Brandeis And Cardozo, Jj.
Justice Stone dissented from the majority's holding that the Act exceeded congressional power.29 He maintained that the power of Congress to tax and to appropriate the revenues of the United States for the general welfare is not limited by the direct grants of legislative power found in the Constitution.30 The Tenth Amendment does not limit it.31
The statute is a valid exercise of that power.32 The tax is a true tax.33 The payments to farmers are valid appropriations of the public revenue to promote the general welfare.34
The fact that the payments are made to farmers who agree to reduce their production does not make the statute a plan for the regulation of agriculture.35 The regulation, if any, is incidental to the exercise of the taxing and spending power.36
Whether respondents have standing to challenge the validity of the processing taxes imposed by the Act?37
Yes. The respondents as receivers of the Hoosac Mills Corporation resisted the United States claim for processing and floor taxes on cotton.40 They had paid processing taxes under protest in connection with hogs.41 They challenged the taxes as part of an unauthorized regulatory plan rather than as mere taxpayers seeking to restrain expenditures from the treasury.42
Respondents have standing to challenge the validity of the processing taxes.43
Whether the processing tax levied by the Act is a true tax for the support of government or instead an instrumentality for regulating agricultural production?44
No. The processing tax is levied upon the first domestic processing of the commodity at a rate fixed by the Secretary to equalize current average farm price and fair exchange value.47 It automatically takes effect when the Secretary determines rental or benefit payments are to be made.48 It ceases when those payments cease.49 It has its entire revenue appropriated solely for rental and benefit payments to farmers who reduce acreage or production rather than for general governmental use.50
The processing tax is an instrumentality for regulating agricultural production rather than a true tax for the support of government.51
Related opinions on this issue
Joined by Brandeis And Cardozo, Jj.
Justice Stone maintained that the constitutional power of Congress to levy an excise tax upon the processing of agricultural products is not questioned.52 The present levy is held invalid not for any want of power to lay such a tax to defray public expenditures, including those for the general welfare, but because the use to which its proceeds are put is disapproved.53 Regulation, if any, is accomplished by the method by which proceeds are expended and would equally be accomplished by any like use of public funds.54
Whether the Act's plan of taxation, appropriation, and payments to farmers invades powers reserved to the states by the Tenth Amendment?55
The attainment of a prohibited end such as regulation of agricultural production may not be accomplished under the pretext of the exertion of powers which are granted.56 Congress cannot under the pretext of executing delegated power pass laws for the accomplishment of objects not entrusted to the federal government.57
Yes. The Agricultural Adjustment Act's scheme, as applied to the processing of cotton by the Hoosac Mills Corporation, imposes a processing tax whose proceeds are appropriated to pay farmers who agree to reduce acreage or production of those commodities.58 This constitutes regulation and control of agricultural production, a purely local activity that lies beyond the powers delegated to the federal government and reserved to the states by the Tenth Amendment.59
The Act's plan of taxation, appropriation, and payments to farmers invades powers reserved to the states by the Tenth Amendment.60