Carmichael v. Southern Coal Coke Co Same v. Gulf States Paper Corporation

CourtUnited States Supreme Court
Citation81 L.Ed. 1245,301 U.S. 495,57 S.Ct. 868,109 A.L.R. 1327
Docket NumberNos. 724,797,s. 724
Decision Date24 May 1937

Appeals from the District Court of the United States for the Middle District of Alabama.

[Syllabus from pages 495-497 intentionally omitted] Messrs. Albert A. Carmichael, of Montgomery, Ala., and Peyton D. Bibb, of Birmingham, Ala., for appellants.

Mr. Borden Burr, of Birmingham, Ala., for appellee Southern Coal & Coke Co.

Mr. Forney Johnston, of Birmingham, Ala., for appellee Gulf States Paper Corporation.

[Argument of Counsel from Pages 499-504 intentionally omitted] Mr. Justice STONE delivered the opinion of the Court.

The questions for decision are whether the Unemployment Compensation Act of Alabama infringes the due 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 (42 U.S.C.A. §§ 301—1305), and because it involves an unconstitutional surrender to the national government of the sovereign power of the state.

Appellee the Southern Coal & Coke Company, is a Delaware corporation employing more than eight persons in its business of coal mining in Alabama. Appellee Gulf States Paper Corporation 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, 28 U.S.C.A. § 380), granting the relief prayed, the case comes here on appeal. Jud.Code, § 238(3), 28 U.S.C. § 345(3), 28 U.S.C.A. § 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 (Laws 1936 1937, p. 92), and March 1, 1937 (Laws 1936—1937, p. 211), Spec.Sess.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, section 2(f), except those engaged in certain specified employments.1 It imposes on the employers the obligation to pay a certain percentage of their total monthly pay rolls into the state Unemployment Compensation Fund, administered by appellants. For 1936 the levy is .9 of 1 per cent.; for 1937 it is 1.8 per cent., and for 1938 and subsequent years it is 2.7 per cent. 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 per cent. of the pay roll. Section 4(c). After May 1, 1936, each employee is required to contribute 1 per cent. 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, section 3(d), cf. Social Security Act, § 904(a), 42 U.S.C.A. § 1104(a), and is to be used as requisitioned by the State Commission to pay unemployment benefits prescribed by the statute, sections 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 unem- ployment, upon prescribed conditions and at prescribed rates.

The Act satisfies the criteria which, by section 903(a) of the Social Security Act of August 14, 1935, c. 531, 49 Stat. 620, 640, 42 U.S.C. § 1103(a), 42 U.S.C.A. § 1103(a), 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 section 902 of the Social Security Act, 42 U.S.C.A. § 1102, 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 per cent. of the tax. See Chas. C. Steward Machine Co. v. Davis, 301 U.S. 548, 57 S.Ct. 883, 81 L.Ed. —-, decided this day.

In the court below, the statute was assailed as repugnant to various provisions of the State Constitution. These contentions have been put at rest by the decision of the Supreme Court of Alabama in Beeland Wholesale Company v. Kaufman, 174 So. 516, holding the state act valid under both the State and Federal Constitutions. The statute was also attacked on the ground that the Social Security Act is invalid under the Federal Constitution, since the state act declares that it 'shall become void' if the Supreme Court of the United States shall hold the Social Security Act invalid. The Alabama court interpreted the statute as having operative effect only if the Social Security Act were constitutional—even in advance of a decision by this Court. We need not decide whether the state court's ruling that the federal statute is valid is conclusive upon us for the purpose of determining whether the state law is presently in force, Miller's Executors v. Swann, 150 U.S. 132, 14 S.Ct. 52, 37 L.Ed. 1028; Louisville & Nashville R. Co. v. Western Union Telegraph Co., 237 U.S. 300, 35 S.Ct. 598, 59 L.Ed. 965, because its conclusion as to the validity of the federal act agrees with our own, announced in Chas. C. Steward Machine Co. v. Davis, supra.

Attacks were leveled on the statute on numerous other grounds, which are urged here—as an infringement of the due process and equal protection clauses of the Fourteenth Amendment, as an unconstitutional surrender to the United States government of the sovereign power of the state, and as a measure owing its passage to the coercive action of Congress in the enactment of the Social Security Act.

In Beeland Wholesale Company v. Kaufman, supra, the Supreme Court of Alabama held that the contributions which the statute exacts of employers are excise taxes laid in conformity to the constitution and laws of the state. While the particular name which a state court or legislature may give to a money payment commanded by its statute is not controlling here when its constitutionality is in question, cf. Educational Films Corp. v. Ward, 282 U.S. 379, 387, 51 S.Ct. 170, 171, 75 L.Ed. 400, 71 A.L.R. 1226; Storaasli v. Minnesota, 283 U.S. 57, 62, 51 S.Ct. 354, 355, 75 L.Ed. 839; Wagner v. City of Covington, 251 U.S. 95, 102, 104, 40 S.Ct. 93, 94, 64 L.Ed. 157, 168; Standard Oil Co. v. Graves, 249 U.S. 389, 394, 39 S.Ct. 320, 63 L.Ed. 662, we see no reason to doubt that the present statute is an exertion of the taxing power of the state. Cf. Carley & Hamilton v. Snook, 281 U.S. 66, 71, 50 S.Ct. 204, 206, 74 L.Ed. 704, 68 A.L.R. 194.

Taxes, which are but the means of distributing the burden of the cost of government, are commonly levied on property or its use, but they may likewise be laid on the exercise of personal rights and privileges. As has been pointed out by the opinion in the Chas. C. Steward Machine Co. Case, such levies, including taxes on the exercise of the right to employ or to be employed, were known in England and the Colonies before the adoption of the Constitution, and must be taken to be embraced within the wide range of choice of subjects of taxation, which was an attribute of the sovereign power of the states at the time of the adoption of the Constitution, and which was reserved to them by that instrument. As the present levy has all the indicia of a tax, and is of a type traditional in the history of Anglo-American legislation, it is within state taxing power, and it is immaterial whether it is called an excise or by another name. See Barwide v. Sheppard, 299 U.S. 33, 36, 57 S.Ct. 70, 71, 81 L.Ed. 23. Its validity under the Federal Constitution is to be determined in the light of constitutional principles applicable to state taxation.

Validity of the Tax Under the Fourteenth Amendment.

First. Validity of the Tax Qua Tax. It is inherent in the exercise of the power to tax that a state be free to select the subjects of taxation and to grant exemptions. Neither due process nor equal protection imposes upon a state any rigid rule of equality of taxation. See Bell's Gap R. Co. v. Pennsylvania, 134 U.S. 232, 237, 10 S.Ct. 533, 33 L.Ed. 892; Lawrence v. State Tax Commission, 286 U.S. 276, 284, 52 S.Ct. 556, 558, 76 L.Ed. 1102, 87 A.L.R. 374. This Court has repeatedly held that inequalities which result from a singling out of one particular class for taxation or exemption, infringe no constitutional limitation. Magoun v. Illinois Trust & Savings Bank, 170 U.S. 283, 293, 18 S.Ct. 594, 42 L.Ed. 1037; American Sugar Refining Co. v. Louisiana, 179 U.S. 89, 94, 21 S.Ct. 43, 45 L.Ed. 102; Armour Packing Co. v. Lacy, 200 U.S. 226, 235, 26 S.Ct. 232, 50 L.Ed. 451; Brown-Forman Co. v. Kentucky, 217 U.S. 563, 573, 30 S.Ct. 578, 54 L.Ed. 883; Quong Wing v. Kirkendall, 223 U.S. 59, 62, 63, 32 S.Ct. 192, 56 L.Ed. 350; Armour & Co. v. Virginia, 246 U.S. 1, 6, 38 S.Ct. 267, 62 L.Ed. 547; Alaska Fish Salting & By-Products Co. v. Smith, 255 U.S. 44, 48, 41 S.Ct. 219, 220, 65 L.Ed. 489; State Board of Tax Commissioners v. Jackson, 283 U.S. 527, 537, 51 S.Ct. 540, 543, 75 L.Ed. 1248, 73 A.L.R. 1464, 75 A.L.R. 1536; Broad River Power Co. v. Query, 288 U.S. 178, 180, 53 S.Ct. 326, 327, 77 L.Ed. 685; Fox v. Standard Oil Co., 294 U.S. 87, 97, 55 S.Ct. 333, 337, 79 L.Ed. 780; Cincinnati Soap Co. v. United States, 301 U.S. 308, 57 S.Ct. 764, 81 L.Ed. —-, May 3, 1937; Great Atlantic & Pacific Tea Company v. Grosjean, 301 U.S. 412, 57...

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