Bailey v. Drexel Furniture Co Child Labor Tax Case

• Decision Date: 15 May 1922
• Docket Number: No. 657,657
• Citation: 259 U.S. 20,66 L.Ed. 817,42 S.Ct. 449,21 A. L. R. 1432
• Parties: BAILEY v. DREXEL FURNITURE CO. CHILD LABOR TAX CASE
• Court: U.S. Supreme Court

259 U.S. 20

42 S.Ct. 449

66 L.Ed. 817

BAILEY

v DREXEL FURNITURE CO. CHILD LABOR TAX CASE.

No. 657.

Argued March 8, 1922.

Decided May 15, 1922.

Mr. Solicitor General Beck, of Washington D. C., for plaintiff in error.

[Argument of Counsel from pages 21-27 intentionally omitted] Mr. Wm. P. Bynum, of Greensboro, N. C., for defendant in error.

[Argument of Counsel from pages 28-33 intentionally omitted]

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Mr. Chief Justice TAFT delivered the opinion of the Court.

This case presents the question of the constitutional validity of the Child Labor Tax Law. The plaintiff below, the Drexel Furniture Company, is engaged in the manufacture of furniture in the Western district of North Carolina. On September 20, 1921, it received a notice from Bailey, United States collector of internal revenue for the district, that it had been assessed $6,312.79 for having during the taxable year 1919 employed and permitted to work in its factory a boy under 14 years of age, thus incurring the tax of 10 per cent. on its net profits for that year. The company paid the tax under protest, and, after rejection of its claim for a refund, brought this suit. On demurrer to an amended complaint, judgment was entered for the company against the collector for the full amount, with interest. The writ of error is prosecuted by the collector direct from the District Court under section 238 of the Judicial Code (Comp. St. § 1215).

The Child Labor Tax Law is title No. XII of an act entitled 'An act to provide revenue and for other purposes,' approved February 24, 1919, 40 Stat. 1057, 1138 (Comp. St. Ann. Supp. 1919, §§ 6336 7/8 a to 6336 7/8 h). The heading of the title is 'Tax on Employment of Child Labor.' It begins with section 1200 and includes eight sections. Section 1200 is as follows:

'Sec. 1200. That every person (other than a bona fide boys' or girls' canning club recognized by the agricultural department of a state and of the United States) operating (a) any mine or quarry situated in the United States in which children under the age of sixteen years have been employed or permitted to work during any portion of the taxable year; or (b) any mill, cannery, workshop, factory, or manufacturing establishment situated in the United States in which children under the age of fourteen years have been employed or permitted to

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work, or children between the ages of fourteen and sixteen have been employed or permitted to work more than eight hours in any day or more than six days in any week, or after the hour of seven o'clock post meridian, or before the hour of six o'clock ante meridian, during any portion of the taxable year, shall pay for each taxable year, in addition to all other taxes imposed by law, an excise tax equivalent to 10 per centum of the entire net profits received or accrued for such year from the sale or disposition of the product of such mine, quarry, mill, cannery, workship, factory, or manufacturing establishment.'

Section 1203 relieves from liability to the tax any one who employs a child, believing him to be of proper age relying on a certificate to this effect issued by persons prescribed by a board consisting of the Secretary of the Treasury, the Commissioner of Internal Revenue, and the Secretary of Labor, or issued by state authorities. The section also provides in paragraph (b) that——

'The tax imposed by this title shall not be imposed in the case of any person who proves to the satisfaction of the Secretary that the only employment or permission to work which but for this section would subject him to the tax, has been of a child employed or permitted to work under a mistake of fact as to the age of such child and without intention to evade the tax.'

Section 1206 gives authority to the Commissioner of Internal Revenue, or any other person authorized by him 'to enter and inspect at any time any mine, quarry, mill, cannery, workshop, factory or manufacturing establishment.' The Secretary of Labor, or any person whom he authorizes, is given like authority in order to comply with a request of the Commissioner to make such inspection and report the same. Any person who refuses entry or obstructs inspection is made subject to fine or imprisonment or both.

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The law is attacked on the ground that it is a regulation of the employment of child labor in the states—an exclusively state function under the federal Constitution and within the reservations of the Tenth Amendment. It is defendant on the ground that it is a mere excise tax levied by the Congress of the United States under its broad power of taxation conferred by section 8, article 1, of the federal Constitution. We must construe the law and interpret the intent and meaning of Congress from the language of the act. The words are to be given their ordinary meaning unless the context shows that they are differently used. Does this law impose a tax with only that incidental restraint and regulation which a tax must inevitably involve? Or does it regulate by the use of the so-called tax as a penalty? If a tax, it is clearly an excise. If it were an excise on a commodity or other thing of value, we might not be permitted under previous decisions of this court to infer solely from its heavy burden that the act intends a prohibition instead of a tax. But this act is more. It provides a heavy exaction for a departure from a detailed and specified course of conduct in business. That course of business is that employers shall employ in mines and quarries, children of an age greater than 16 years; in mills and factories, children of an age greater than 14 years, and shall prevent children of less than 16 years in mills and factories from working more than 8 hours a day or 6 days in the week. If an employer departs from this prescribed course of business, he is to pay to the government one-tenth of his entire net income in the business for a full year. The amount is not to be proportioned in any degree to the extent or frequency of the departures, but is to be paid by the employer in full measure whether he employs 500 children for a year, or employs only one for a day. Moreover, if he does not know the child is within the named age limit, he is not to pay;

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that is to say, it is only where he knowingly departs from the prescribed course that payment is to be exacted. Scienters are associated with penalties, not with taxes. The employer's factory is to be subject to inspection at any time not only by the taxing officers of the Treasury, the Department normally charged with the collection of taxes, but also by the Secretary of Labor and his subordinates, whose normal function is the advancement and protection of the welfare of the workers. In the light of these features of the act, a 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. Its prohibitory and regulatory effect and purpose are palpable. All others can see and understand this. How can we properly shut our minds to it?

It is the high duty and function of this court in cases regularly brought to its bar to decline to recognize or enforce seeming laws of Congress, dealing with subjects not intrusted to Congress, but left or committed by the supreme law of the land to the control of the states. We cannot avoid the duty, even though it require us to refuse to give effect to legislation designed to promote the highest good. The good sought in unconstitutional legislation is an insidious feature, because it leads citizens and legislators of good purpose to promote it, without thought of the serious breach it will make in the ark of our covenant, or the harm which will come from breaking down recognized standards. In the maintenance of local self-government, on the one hand, and the national power, on the other, our country has been able to endure and prosper for near a century and a half.

Out of a proper respect for the acts of a co-ordinate branch of the government, this court has gone far to sustain taxing acts as such, even though there has been ground for suspecting, from the weight of the tax, it was intended to destroy its subject. But in the act before

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us the presumption of validity cannot prevail, because the proof of the contrary is found on the very face of its provisions. Grant the validity of this law, and all that Congress would need to do, hereafter, in seeking to take over to its control any one of the great number of subjects of public interest, jurisdiction of which the states have never parted with, and which are reserved to them by the Tenth Amendment, would be to enact a detailed measure of complete regulation of the subject and enforce it by a socalled tax upon departures from it. To give such magic to the word 'tax' would be to break down all constitutional limitation of the powers of Congress and completely wipe out the sovereignty of the states.

The difference between a tax and a penalty is sometimes difficult to define, and yet the consequences of the distinction in the required method of their collection often are important. Where the sovereign enacting the law has power to impose both tax and penalty, the difference between revenue production and mere regulation may be immaterial, but not so when one sovereign can impose a tax only, and the power of regulation rests in another. Taxes are occasionally imposed in the discretion of the Legislature on proper subjects with the primary motive of obtaining revenue from them and with the incidental motive of discouraging them by making their continuance onerous. They do not lose their character as taxes...