• Last updated on November 11, 2022

The Supreme Court ruled that Con- gress could not use its taxing power to impose regulations on production, which were powers reserved to the states by the Tenth Amendment.

In Hammer v. Dagenhart[case]Hammer v. Dagenhart[Hammer v. Dagenhart] (1918), the Supreme Court struck down the first federal child labor statute as an unconstitutional use of the commerce power. In response, Congress enacted the Keating-Owen Child Labor ActKeating-Owen Child Labor Act of 1919, which imposed a 10 percent tax on the net profits of companies employing children under the age of fourteen. Supporters of the law noted that the Court had approved of a prohibitive excise tax on oleomargarine in McCray v. United States[case]McCray v. United States[MacCray v. United States] (1904).Reserved powersManufacturing;Bailey v. Drexel Furniture Co.[Bailey v. Drexel Furniture Co.]Dual federalism;Bailey v. Drexel Furniture Co.[Bailey v. Drexel Furniture Co.]Reserved powers

In Bailey, the justices voted eight to one to strike down the law. Chief Justice William H. Taft’sTaft, William H.;Bailey v. Drexel Furniture Co.[Bailey v. Drexel Furniture Co.] opinion for the majority declared that the “so-called” tax was really a disguised regulation designed to stop child labor. To allow taxes to be used for such purposes, he declared, would give Congress almost unlimited powers and “completely wipe out the sovereignty of the states.” In McCray, the Court had approved of a tax that provided only “incidental restraint and regulation,” but the child labor tax, in contrast, had a “prohibitory and regulatory effect.” Modern commentators usually find that Taft’s distinction lacks merit. Although the Bailey decision remained good law for two decades, the Court rejected its theoretical foundations in Mulford v. Smith[case]Mulford v. Smith[Mulford v. Smith] (1939).

Butler, United States v.

Federalism

Labor

McCray v. United States

Mulford v. Smith

Police powers

Taxing and spending clause

Tenth Amendment

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