Helvering v. Davis

Last updated
Helvering v. Davis
Seal of the United States Supreme Court.svg
Argued May 5, 1937
Decided May 24, 1937
Full case name Guy T. Helvering, Commissioner of Internal Revenue v. Davis
Citations301 U.S. 619 ( more )
57 S. Ct. 904; 81 L. Ed. 1307; 1937 U.S. LEXIS 1200
Case history
PriorDavis v. Edison Electric Illuminating Co. of Boston, 18 F. Supp. 1 (D. Mass. 1937); reversed, 89 F.2d 393 (1st Cir. 1937); cert. granted, 301 U.S. 674(1937).
Holding
The proceeds of both the employee and employer taxes are to be paid into the Treasury like any other internal revenue generally, and are not earmarked in any way. The Social Security Act of 1935 does not contravene the Tenth Amendment, as Congress is permitted to spend for the general welfare.
Court membership
Chief Justice
Charles E. Hughes
Associate Justices
Willis Van Devanter  · James C. McReynolds
Louis Brandeis  · George Sutherland
Pierce Butler  · Harlan F. Stone
Owen Roberts  · Benjamin N. Cardozo
Case opinions
MajorityCardozo, joined by Hughes, Brandeis, Stone, Sutherland, Van Devanter, and Roberts
DissentMcReynolds, joined by Butler
Laws applied
U.S. Const. Art. I § 8, amend. X; Social Security Act of 1935

Helvering v. Davis, 301 U.S. 619 (1937), was a decision by the U.S. Supreme Court that held that Social Security was constitutionally permissible as an exercise of the federal power to spend for the general welfare and so did not contravene the Tenth Amendment of the U.S. Constitution. [1]

Contents

The Court's 7–2 decision defended the constitutionality of the old-age benefit program of the Social Security Act of 1935 by requiring only welfare spending to be for the common benefit, as distinguished from some mere local purpose. It affirmed a District Court decree that held that the tax upon employees was not properly at issue and that the tax upon employers was constitutional.

Facts

A shareholder of the Edison Electric Illuminating Company brought a derivative action to restrain the company from making payments and deductions required by the Social Security Act of 1935 on the grounds that it was unconstitutional. He sought an injunction and a declaration that the Act was void.

Decision

The Supreme Court's decision in the case was written by Justice Benjamin N. Cardozo and supported the right of Congress to interpret the "general welfare" clause in the Constitution.

Congress may spend money in aid of the 'general welfare'.... There have been great statesmen in our history who have stood for other views.... The line must still be drawn between one welfare and another, between particular and general. Where this shall be placed cannot be known through a formula in advance of the event.... The discretion belongs to Congress, unless the choice is clearly wrong, a display of arbitrary power, not an exercise of judgment. This is now familiar law....

...

Congress did not improvise a judgment when it found that the award of old age benefits would be conducive to the general welfare. The President's Committee on Economic Security made an investigation and report, aided by a research staff of Government officers and employees, and by an Advisory Council and seven other advisory groups. Extensive hearings followed before the House Committee on Ways and Means, and the Senate Committee on Finance. A great mass of evidence was brought together supporting the policy which finds expression in the act.... The evidence is impressive that, among industrial workers, the younger men and women are preferred over the older. In times of retrenchment, the older are commonly the first to go, and even if retained, their wages are likely to be lowered. The plight of men and women at so low an age as 40 is hard, almost hopeless, when they are driven to seek for reemployment. Statistics are in the brief. A few illustrations will be chosen from many there collected. In 1930, out of 224 American factories investigated, 71, or almost one third, had fixed maximum hiring age limits; in 4 plants, the limit was under 40; in 41, it was under 46. In the other 153 plants, there were no fixed limits, but in practice few were hired if they were over 50 years of age. [2] With the loss of savings inevitable in periods of idleness, the fate of workers over 65, when thrown out of work, is little less than desperate. A recent study of the Social Security Board informs us that

one-fifth of the aged in the United States were receiving old-age assistance, emergency relief, institutional care, employment under the works program, or some other form of aid from public or private funds; two-fifths to one-half were dependent on friends and relatives, one-eighth had some income from earnings, and possibly one-sixth had some savings or property. Approximately three out of four persons 65 or over were probably dependent wholly or partially on others for support. [3]

We summarize in the margin the results of other studies by state and national commissions. [4] They point the same way.

The problem is plainly national in area and dimensions. Moreover, laws of the separate states cannot deal with it effectively. Congress, at least, had a basis for that belief. States and local governments are often lacking in the resources that are necessary to finance an adequate program of security for the aged. This is brought out with a wealth of illustration in recent studies of the problem. Apart from the failure of resources, states and local governments are at times reluctant to increase so heavily the burden of taxation to be borne by their residents for fear of placing themselves in a position of economic disadvantage as compared with neighbors or competitors. We have seen this in our study of the problem of unemployment compensation.... A system of old age pensions has special dangers of its own if put in force in one state and rejected in another. The existence of such a system is a bait to the needy and dependent elsewhere, encouraging them to migrate and seek a haven of repose. Only a power that is national can serve the interests of all.

Joining the decision was Justice Harlan Stone, who during the drafting of the legislation had advised Secretary Frances Perkins that the constitutionality of Social Security could be based upon "The taxing power of the Federal Government, my dear; the taxing power is sufficient for everything you want and need." [5]

See also

Further reading

Related Research Articles

<span class="mw-page-title-main">Social Security (United States)</span> American retirement system

In the United States, Social Security is the commonly used term for the federal Old-Age, Survivors, and Disability Insurance (OASDI) program and is administered by the Social Security Administration (SSA). The original Social Security Act was enacted in 1935, and the current version of the Act, as amended, encompasses several social welfare and social insurance programs.

<span class="mw-page-title-main">Social Security Act</span> 1935 U.S. law creating the Social Security program and unemployment insurance

The Social Security Act of 1935 is a law enacted by the 74th United States Congress and signed into law by US President Franklin D. Roosevelt. The law created the Social Security program as well as insurance against unemployment. The law was part of Roosevelt's New Deal domestic program.

<span class="mw-page-title-main">Welfare</span> Means-oriented social benefit

Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifically to social insurance programs which provide support only to those who have previously contributed, as opposed to social assistance programs which provide support on the basis of need alone. The International Labour Organization defines social security as covering support for those in old age, support for the maintenance of children, medical treatment, parental and sick leave, unemployment and disability benefits, and support for sufferers of occupational injury.

United States v. Butler, 297 U.S. 1 (1936), is a U.S. Supreme Court case that held that the U.S. Congress has not only the power to lay taxes to the level necessary to carry out its other powers enumerated in Article I of the U.S. Constitution, but also a broad authority to tax and spend for the "general welfare" of the United States. The decision itself concerned whether the processing taxes instituted by the 1933 Agricultural Adjustment Act were constitutional.

<span class="mw-page-title-main">Railroad Retirement Board</span> Independent agency of the United States government

The U.S. Railroad Retirement Board (RRB) is an independent agency in the executive branch of the United States government created in 1935 to administer a social insurance program providing retirement benefits to the country's railroad workers.

Social welfare, assistance for the ill or otherwise disabled and the old, has long been provided in Japan by both the government and private companies. Beginning in the 1920s, the Japanese government enacted a series of welfare programs, based mainly on European models, to provide medical care and financial support. During the post-war period, a comprehensive system of social security was gradually established.

The Taxing and Spending Clause, Article I, Section 8, Clause 1 of the United States Constitution, grants the federal government of the United States its power of taxation. While authorizing Congress to levy taxes, this clause permits the levying of taxes for two purposes only: to pay the debts of the United States, and to provide for the common defense and general welfare of the United States. Taken together, these purposes have traditionally been held to imply and to constitute the federal government's taxing and spending power. The text of the constitution reads thus:

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;

Steward Machine Company v. Davis, 301 U.S. 548 (1937), was a case in which the U.S. Supreme Court upheld the unemployment compensation provisions of the Social Security Act of 1935, which established the federal taxing structure that was designed to induce states to adopt laws for funding and payment of unemployment compensation. The decision signaled the Court's acceptance of a broad interpretation of Congressional power to influence state laws.

Social security, in Australia, refers to a system of social welfare payments provided by Australian Government to eligible Australian citizens, permanent residents, and limited international visitors. These payments are almost always administered by Centrelink, a program of Services Australia. In Australia, most payments are means tested.

The Dirty Dozen is a Cato Institute book, written by Robert A. Levy and William Mellor and released in May 2008, about twelve U.S. Supreme Court decisions that were viewed as greatly undermining individual freedom by expanding the power of government. The book was the subject of many reviews and much press. It was released around the time that Levy gained media attention as the organizer and financier behind District of Columbia v. Heller.

<span class="mw-page-title-main">Social programs in the United States</span> Overview of social programs in the United States of America

Social programs in the United States are programs designed to ensure that the basic needs of the American population are met. Federal and state social programs include cash assistance, health insurance, food assistance, housing subsidies, energy and utilities subsidies, and education and childcare assistance. Similar benefits are sometimes provided by the private sector either through policy mandates or on a voluntary basis. Employer-sponsored health insurance is an example of this.

<span class="mw-page-title-main">Welfare in Finland</span> Overview of welfare in Finland

Social security or welfare in Finland is very comprehensive compared to what almost all other countries provide. In the late 1980s, Finland had one of the world's most advanced welfare systems, which guaranteed decent living conditions to all Finns. Created almost entirely during the first three decades after World War II, the social security system was an outgrowth of the traditional Nordic belief that the state is not inherently hostile to the well-being of its citizens and can intervene benevolently on their behalf. According to some social historians, the basis of this belief was a relatively benign history that had allowed the gradual emergence of a free and independent peasantry in the Nordic countries and had curtailed the dominance of the nobility and the subsequent formation of a powerful right wing. Finland's history was harsher than the histories of the other Nordic countries but didn't prevent the country from following their path of social development.

A general welfare clause is a section that appears in many constitutions and in some charters and statutes that allows that the governing body empowered by the document to enact laws to promote the general welfare of the people, which is sometimes worded as the public welfare. In some countries, it has been used as a basis for legislation promoting the health, safety, morals, and well-being of the people governed by it.

The Social Security Act 1938 is a New Zealand Act of Parliament concerning unemployment insurance which established New Zealand as a welfare state. This act is important in the history of social welfare, as it established the first ever social security system in the world.

<span class="mw-page-title-main">History of Social Security in the United States</span> Aspect of history

A limited form of the Social Security program began as a measure to implement "social insurance" during the Great Depression of the 1930s, when poverty rates among senior citizens exceeded 50 percent.

<i>United States v. Silk</i> 1947 United States Supreme Court case

United States v. Silk, 331 U.S. 704 (1947), was a United States Supreme Court case regarding US labor law. The case concerned the scope of protection for employees under the Social Security Act 1935.

<span class="mw-page-title-main">Pension policy in South Korea</span>

South Korea's pension scheme was introduced relatively recently, compared to other democratic nations. Half of the country's population aged 65 and over lives in relative poverty, or nearly four times the 13% average for member countries of the Organisation for Economic Co-operation and Development (OECD). This makes old age poverty an urgent social problem. Public social spending by general government is half the OECD average, and is the lowest as a percentage of GDP among OECD member countries.

Davis v. Michigan, 489 U.S. 803 (1989), is a case in the Supreme Court of the United States holding that states may not tax federal pensions if they exempt their own state pensions from taxation. In the 1930s, the federal and state governments began to charge income tax on salaries paid to each other's employees. However, reciprocal treatment was required under the doctrine of intergovernmental immunity. The Court's ruling extended the reciprocity to pensions, since they are a form of deferred compensation for services previously rendered by an employee.

The New Deal often encountered heavy criticism, and had many constitutional challenges.

References

  1. Helvering v. Davis, 301 U.S. 619 (1937). PD-icon.svg This article incorporates public domain material from this U.S government document.
  2. Hiring and Separation Methods in American Industry, 35 Monthly Labor Review, pp. 1005, 1009.
  3. Economic Insecurity in Old Age (Social Security Board, 1937), p. 15.
  4. The Senate Committee estimated, when investigating the present act, that over one half of the people in the United States over 65 years of age are dependent upon others for support. Senate Report No. 628, 74th Congress, 1st Session, p. 4. A similar estimate was made in the Report to the President of the Committee on Economic Security, 1935, p. 24. A Report of the Pennsylvania Commission on Old Age Pensions made in 1919 (p. 108) after a study of 16,281 persons and interviews with more than 3,500 persons 65 years and over showed two fifths with no income but wages and one fourth supported by children; 1.5 percent had savings and 11.8 percent had property. A report on old age pensions by the Massachusetts Commission on Pensions (Senate No. 5, 1925, pp. 41, 52) showed that, in 1924, two thirds of those above 65 had, alone or with a spouse, less than $5,000 of property, and one fourth had none. Two thirds of those with less than $5,000 and income of less than $1,000 were dependent in whole or in part on others for support. A report of the New York State Commission made in 1930 (Legis.Doc. No. 67, 1930, p. 39) showed a condition of total dependency as to 58 percent of those 65 and over, and 62 percent of those 70 and over. The national Government has found in connection with grants to states for old age assistance under another title of the Social Security Act (Title I) that, in February, 1937, 38.8 percent of all persons over 65 in Colorado received public assistance; in Oklahoma, the percentage was 44.1, and in Texas 37.5. In 10 states out of 40 with plans approved by the Social Security Board, more than 25 percent of those over 65 could meet the residence requirements and qualify under a means test and were actually receiving public aid. Economic Insecurity in Old Age, supra, p. 15.
  5. "Social Security History".