301 U.S. 495 (1937), 724, Carmichael v. Southern Coal & Coke Co.

Docket Nº:No. 724
Citation:301 U.S. 495, 57 S.Ct. 868, 81 L.Ed. 1245
Party Name:Carmichael v. Southern Coal & Coke Co.
Case Date:May 24, 1937
Court:United States Supreme Court
 
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Page 495

301 U.S. 495 (1937)

57 S.Ct. 868, 81 L.Ed. 1245

Carmichael

v.

Southern Coal & Coke Co.

No. 724

United States Supreme Court

May 24, 1937

Argued April 7, 8, 1937

APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES

FOR THE MIDDLE DISTRICT OF ALABAMA

Syllabus

The Unemployment Compensation Act of Alabama sets up a scheme for providing unemployment benefits for workers employed within the State by designated classes of employers. These include all who employ eight or more persons for twenty or more weeks in the year, except those engaged in certain specified employments. The employers are to pay certain percentages of their total monthly payrolls into the state Unemployment Compensation Fund, and each employee is required to contribute to the fund a

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percentage of his wages. The fund is to be deposited in the "Unemployment Trust Fund" of the United States Government established by the Federal Social Security Act, and is to be used as requisitioned by the State Commission to pay unemployment benefits prescribed by the statute, but without any liability on the part of the State beyond amounts paid into or earned by the Fund. Benefits are payable from the fund to the employees covered by the Act, in the event of their unemployment, upon prescribed conditions and at prescribed rates. The Act satisfies the criteria which, by § 903(a) of the Social Security Act, are made prerequisite to its approval by the Social Security Board created by that Act, and it has been approved by the Board as that section directs. By § 902 of the Social Security Act, contributors to the state fund are entitled to credit their contributions in satisfaction of the tax imposed on employers by the Social Security Act, to the extent of 90% of the tax.

Held:

1. The Act, as an Act taxing employers, is within the state taxing power. P. 508.

Taxes are the means of distributing the burden of the cost of government, commonly levied on property or its use, but likewise leviable on the exercise of personal rights and privileges, including the exercise of the right to employ or to be employed.

2. The tax on employers is valid under the Fourteenth Amendment. P. 508.

(1) Inequalities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation. P. 509.

(2) A legislature is not bound to tax every member of a class or none. It may make distinctions of degree having a rational basis, and, when subjected to judicial scrutiny, they must be presumed to rest on such a basis if such would exist under any conceivable state of facts. P. 509.

(3) Exclusion from the tax of employers of less than eight is a distinction of degree such as the law is often called upon to make, and is furthermore justified on the ground of administrative convenience and expense. P. 510.

(4) The exemption of particular classes of employers -- those who employ agricultural laborers, domestic servants, seamen, insurance agents, or close relatives -- and the exclusion of charitable institutions, interstate railways, or the government of the United States or of any State or political subdivision, whereby the subject

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of the tax is confined to those who employ labor in the processes of industrial production and distribution, is not arbitrary. P. 512.

Where the public interest is served, one business may be left untaxed and another taxed, in order to promote the one or to restrict or suppress the other.

Several of the exemptions may rest upon administrative considerations.

The burden rests upon those who complain of showing that there are no differences between the exempt employers and the industrial employers who are taxed sufficient to justify differences in taxation.

(5) The provision for taxing employees is separable, and therefore not subject to objection by employers. P. 513.

(6) Distinct taxes imposed by a single statute are not to be deemed inseparable unless that conclusion is unavoidable. P. 513.

(7) Under the Fourteenth Amendment, the state taxing power can be exerted only to effect a public purpose, and does not embrace the raising of revenue for private purposes. P. 514.

(8) The requirements of due process leave free scope for the exercise of a wide legislative discretion in determining what expenditures will serve the public interest. P. 514.

(9) The public purposes of a State, for which it may raise funds by taxation, embrace expenditures for its general welfare. P. 514.

(10) Whether the expenditure under the Act serves a public purpose is a practical question addressed to the lawmaking department, and it would require a plain case of departure from every public purpose which could reasonably be conceived to justify the intervention of a court. P. 515.

(11) Relief of unemployment is a public purpose. P. 515.

(12) When public evils ensue from individual misfortunes or needs, the legislature may strike at the evil at its source. If the purpose is legitimate because public, it will not be defeated because the execution of it involves payments to individuals. P. 518.

(13) The scheme of the Act is not subject to any constitutional infirmity in not being limited to the indigent, or because it is extended to some less deserving than others, such as those discharged for misconduct. P. 518.

(14) The fact that the Act restricts its benefits to employees of the class of employers who are subject to the tax does not render it arbitrary or discriminatory, in violation of the Fourteenth Amendment. P. 519.

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(15) It is not a valid objection to the tax on employers that the benefits paid and the persons to whom they are paid are unrelated to the persons taxed and the amount of the tax which they pay -- in short, that those who pay the tax may not have contributed to the unemployment, and may not be benefited by the expenditure. P. 521.

The tax is a means of distributing the burden of the cost of government. This Court has repudiated the suggestion that the Constitution requires the benefits derived from the expenditure of public moneys to be apportioned to the burdens of the taxpayer, or that he can resist the payment of the tax because it is not expended for purposes which are peculiarly beneficial to him. P. 522.

(16) The Act is not the invalid product of the coercive operation of the Federal Social Security Act, and involves no unconstitutional surrender of State power. Steward Machine Co. v. Davis, post, p. 548. P. 525.

17 F.Supp. 225 reversed.

Appeals from decrees of the District Court, of three judges, restraining the present petitioners, officials of Alabama, from collecting the money contributions exacted of them by the provisions of the Alabama Unemployment Compensation Act.

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STONE, J., lead opinion

MR. JUSTICE STONE delivered the opinion of the Court.

The questions for decision are whether the Unemployment Compensation Act of Alabama infringes the due

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process and equal protection clauses of the fourteenth Amendment, and whether it is invalid because its enactment was coerced by the action of the Federal government in adopting the Social Security Act, and because it involves an unconstitutional surrender to the national government of the sovereign power of the state.

Appellee, the Southern Coal & Coke Co., is a Delaware corporation employing more than eight persons in its business of manufacturing paper within the state. They brought the present suits in the District Court for the Middle District of Alabama to restrain appellants, the Attorney General and the Unemployment Compensation Commission of Alabama, from collecting the money contributions exacted of them by the provisions of the Alabama Unemployment Compensation Act. From the decrees of the district court, three judges sitting (Jud.Code, § 266, 28 U.S.C. § 380), granting the relief prayed, the case comes here on appeal. Jud.Code, § 238(3), 28 U.S.C. § 345(3).

The Unemployment Compensation Act, Ala.Gen. Acts 1935, No. 447, p. 950; Ala.Code of 1928 (1936 Cum.Supp.) § 7597(1) et seq., as amended by Gen.Acts 1936 (Ex.Sess.), Nos. 156 (page 176), 194 (page 225), 195 (page 228), and Acts of Feb. 10, 1937, sets up a comprehensive scheme for providing unemployment benefits for workers employed within the state by employers designated by the Act. These employers include all who employ eight or more persons for twenty or more weeks in the year, § 2(f), except those engaged in certain specified employments.1 It imposes

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on the employers the obligation to pay a certain percentage of their total monthly payrolls into the state Unemployment Compensation Fund, administered by appellants. For 1936, the [57 S.Ct. 871] levy is .9 of 1 percent; for 1937, it is 1.8 percent, and for 1938 and subsequent years, it is 2.7 percent. Section 4(b). In 1941 and thereafter, the rates of contribution by employers are to be revised in accordance with experience, but in no case are they to be less than 1 1/2 or more than 4 percent of the payroll. Section 4(c). After May 1, 1936, each employee is required to contribute 1 percent of his wages to the fund. Section 4(d). The fund is to be deposited in the "Unemployment Trust Fund" of the United States Government, § 3(d), cf. Social Security Act, § 904(a), and is to be used as requisitioned by the State Commission to pay unemployment benefits prescribed by the statute, §§ 3(b), 3(d), but without any liability on the part of the state beyond amounts paid into or earned by the fund. Benefits are payable from the fund to the employees covered by the Act, in the event of their unemployment,

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upon prescribed conditions and at prescribed rates.

The...

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