Bailey v. Drexel Furniture Co.
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''Bailey v. Drexel Furniture Co.'', 259 U.S. 20 (1922), was a
United States Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...
case in which the 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).


Background

On February 24, 1919,
Congress A congress is a formal meeting of the representatives of different countries, constituent states, organizations, trade unions, political parties, or other groups. The term originated in Late Middle English to denote an encounter (meeting of a ...
passed the Child Labor Tax Law which imposed an excise tax of 10 percent on the net profits of a company that 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 The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory ta ...
) assessed $6,312.79 in excise taxes for employing a child under fourteen during the 1919 tax year. Drexel paid the tax under protest and sued for a refund.


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 An indirect tax (such as sales tax, per unit tax, value added tax (VAT), or goods and services tax (GST), excise, consumption tax, tariff) is a tax that is levied upon goods and services before they reach the customer who ultimately pays the i ...
, did not need to meet a standard as long as it was geographically uniform. In addition, the government contended that the tax was merely an
excise tax file:Lincoln Beer Stamp 1871.JPG, upright=1.2, 1871 U.S. Revenue stamp for 1/6 barrel of beer. Brewers would receive the stamp sheets, cut them into individual stamps, cancel them, and paste them over the Bunghole, bung of the beer barrel so when ...
levied by Congress under its broad power of taxation under Article One of the Constitution. The lower court ruled in favor of the company.


Holding

Chief Justice Taft's Court declared the tax on child labor was unconstitutional because it was a disguised criminal penalty, not a tax, on employment of children. In addition, the Child Labor Tax Law is a regulation on businesses instead of a tax. Taft argued the law describes a set course for businesses and when they deviate from that course, a payment is enacted. Taft said, “
Scienter In law, (Law Latin for "knowingly", ) is a legal term for intent or knowledge of wrongdoing. An offending party then has knowledge of the "wrongness" of an act or event prior to committing it. For example, if a man sells a car with brakes that d ...
s are associated with penalties, not with taxes.” “ court must be blind not to see that the so-called tax is 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.


Implications

One possible criticism is that the decision in Drexel was a reversal of the Supreme Court's position on excise taxes since the early 19th century and that this decision is 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. Despite this reversal of philosophy regarding Congress's ability to regulate through the tax code, the Court's definition of the Child Labor Tax as a penalty due to its characteristics featured prominently in the majority opinion in ''
National Federation of Independent Business v. Sebelius ''National Federation of Independent Business v. Sebelius'', 567 U.S. 519 (2012), was a landmark United States Supreme Court decision in which the Court upheld Congress's power to enact most provisions of the Patient Protection and Affordable Car ...
'', penned by Chief Justice
John Roberts John Glover Roberts Jr. (born January 27, 1955) is an American lawyer and jurist who has served as the 17th chief justice of the United States since 2005. Roberts has authored the majority opinion in several landmark cases, including ''Nati ...
in 2012. The opinion holds that the
individual mandate An individual mandate is a requirement by law for certain persons to purchase or otherwise obtain a good or service. United States Militia act The Militia Acts of 1792, based on the Constitution's militia clause (in addition to its affirmative ...
at the center of the
Patient Protection and Affordable Care Act The Affordable Care Act (ACA), formally known as the Patient Protection and Affordable Care Act and colloquially known as Obamacare, is a landmark U.S. federal statute enacted by the 111th United States Congress and signed into law by Presi ...
does not fulfill any of the characteristics (i.e., the heavy burden of tax for even slight infractions, the requirement of scienter in levying the tax, and the use of the Department of Labor to aid in enforcement) that allowed the Court to consider the Child Labor Tax as outside of Congress’ “Power To lay and collect Taxes, Duties, Imposts and Excises”, and therefore, the individual mandate may be considered within that power. Previously, in ''
Hammer v. Dagenhart ''Hammer v. Dagenhart'', 247 U.S. 251 (1918), was a United States Supreme Court decision in which the Court struck down a federal law regulating child labor. The decision was overruled by ''United States v. Darby Lumber Co.'' (1941). During the ...
'', 247 U. S. 251, the Court ruled a law prohibiting the transportation in interstate commerce of goods manufactured with child labor was unconstitutional. After the court rejected both attempts by Congress to regulate child labor, Congress proposed a
constitutional amendment A constitutional amendment is a modification of the constitution of a polity, organization or other type of entity. Amendments are often interwoven into the relevant sections of an existing constitution, directly altering the text. Conversely, t ...
which would give the national government the power to regulate and prohibit child labor, without a deadline for ratification by the states. The proposed amendment was never ratified, as it was made unnecessary by state child labor laws, and a later reversal of the ''Bailey'' decision after a suit against Section 212 of the
Fair Labor Standards Act The Fair Labor Standards Act of 1938 (FLSA) is a United States labor law that creates the right to a minimum wage, and "time-and-a-half" overtime pay when people work over forty hours a week. It also prohibits employment of minors in "oppres ...
, which prohibited the transportation of goods in interstate commerce made from "oppressive child labor."


See also

*
List of United States Supreme Court cases, volume 259 This is a list of cases reported in volume 259 of ''United States Reports'', decided by the Supreme Court of the United States in 1922. Justices of the Supreme Court at the time of volume 259 U.S. The Supreme Court is established by ...
* ''Lochner'' era *''
Lochner v. New York ''Lochner v. New York'', 198 U.S. 45 (1905), was a landmark decision of the U.S. Supreme Court in which the Court ruled that a New York state law setting maximum working hours for bakers violated the bakers' right to freedom of contract under t ...
'' (1905)


References


External links

* * {{DEFAULTSORT:Bailey V. Drexel Furniture Co. United States Constitution Article One case law United States Supreme Court cases United States Supreme Court cases of the Taft Court Child labor in the United States 1922 in United States case law Taxing and Spending Clause case law Furniture companies of the United States Legal history of North Carolina History of furniture Furniture-making Burke County, North Carolina