Cincinnati Soap Co v. United States Haskins Bros Co v. Malley

• Decision Date: 03 May 1937
• Docket Number: 687,Nos. 659,s. 659
• Citation: 301 U.S. 308,81 L.Ed. 1122,57 S.Ct. 764
• Parties: CINCINNATI SOAP CO. v. UNITED STATES. HASKINS BROS. & CO. v. O'MALLEY
• Court: U.S. Supreme Court

301 U.S. 308

57 S.Ct. 764

81 L.Ed. 1122

CINCINNATI SOAP CO.

v UNITED STATES.

HASKINS BROS. & CO.

v. O'MALLEY.

Nos. 659, 687.

Argued April 1, 2, 1937.

Decided May 3, 1937.

[Syllabus from pages 308-310 intentionally omitted] Mr. Alfred Bettman, of Cincinnati, Ohio, for petitioner Cincinnati soap co.

Mr. Frederick H. Wood, of New York City, for petitioner Haskins Bros. & Co.

Mr. Robert H. Jackson, Asst. Atty. Gen., for respondents.

Mr. Justice SUTHERLAND delivered the opinion of the Court.

Section 602 1/2 of the Revenue Act of 1934, c. 277, 48 Stat. 680, 763, 26 U.S.C.A. § 999, imposes a tax of 3 cents per pound upon the first domestic processing of coconut oil, and provides that all such taxes collected with respect to coconut oil wholly of Philippine production, etc., 'shall be held as a separate fund and paid to the Treasury of the Philippine Islands, but if at any time the Philippine Government provides by any law for any subsidy to be paid to the pro- ducers of copra, coconut oil, or allied products, no further payments to the Philippine Treasury shall be made under this subsection.'

Both petitioners are engaged in manufacturing soap and, at times stated in their petitions, used in its manufacture large quantities of coconut oil wholly the product of the Philippine Islands. In pursuance of section 602 1/2, they made returns and paid the amount of the tax as required by that section. Subsequently, each of them filed with the Bureau of Internal Revenue a claim for the refund of the tax, on the ground that the imposition was not within the constitutional power of Congress. Both claims were denied, and petitions at law were filed in federal district courts to recover the sums paid. Demurrers were interposed attacking the sufficiency of the petitions, and these demurrers were sustained by the trial courts. Appeals were taken to the respective circuit courts of appeal named in the title; and we granted writs of certiorari before a hearing or submission in those courts, because of the importance to the Philippine Islands of an early final decision of the question. Cincinnati Soap Co. v. United States, 300 U.S. 649, 57 S.Ct. 493, 81 L.Ed. —-; Haskins Bros. & Co. v. O'Malley, 300 U.S. 649, 57 S.Ct. 494, 81 L.Ed. —-.

The validity of the tax is assailed by petitioners upon a variety of grounds, developed at length in their respective briefs and by the oral arguments at the bar. So far as we find it necessary to consider the various contentions, they may be stated in general terms as follows: That the tax is not imposed for any purpose contemplated by the taxing clause of section 8, art. 1, of the Federal Constitution—that is to say, it is not imposed to pay the debts or provide for the common defense or general welfare of the United States; that, on the contrary, it is imposed for a purely local purpose, in violation of the Tenth Amendment; that the exaction violates the due process clause of the Fifth Amendment, because it is an arbitrary exaction from one group of persons for the exclusive benefit of another; that the act does not impose a true tax, but is a regulatory measure outside the field of federal power; that it violates clause 7, § 9, of art. 1 of the Constitution, which provides that 'No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law'; that the payment in bulk of the entire proceeds of the tax to the Philippines, with no direction as to the expenditure thereof, constitutes an unlawful delegation of legislative power. In dealing with these contentions, we find it convenient to do so without following the precise order in which they have just been stated. And certain of them are so interrelated that they may be joined for consideration in the same subdivision of the opinion which follows.

First. Plainly, the imposition of the tax in itself is a valid exercise of the taxing power of the federal government. It is purely an excise tax upon a manufacturing process for revenue purposes, and in no sense a regulation of the process itself. The Tenth Amendment is without application, since the powers of the several states over local affairs are not invaded or involved. This is disclosed upon the face of the act so clearly that discussion could not make it plainer. United States v. Butler, 297 U.S. 1, 56 S.Ct. 312, 80 L.Ed. 477, 102 A.L.R. 914, relied upon by petitioner, is not in point. There we held that the sole aim of the statute, as shown by its terms, was to regulate a local situation, a matter wholly within the reserved powers of the states; and moreover that it amounted to a naked taking of the property of one group of persons for bestowal upon another group. The Child Labor Tax Case, 259 U.S. 20, 42 S.Ct. 449, 66 L.Ed. 817, 21 A.L.R. 1432, and other cases cited, bear still more remotely upon the contention. It is enough to say that the feature of the present case which differentiates it from all those cited is that the exaction here, both in form and substance, is a true tax, imposed, as we presently shall show, for a federal constitutional purpose. In that view the due process clause of the Fifth Amendment is not involved.

Second. Standing apart, therefore, the tax is unassailable. It is said to be bad because it is earmarked and devoted from its inception to a specific purpose. But if the tax, qua tax, be good, as we hold it is, and the purpose specified be one which would sustain a subsequent and separate appropriation made out of the general funds of the Treasury, neither is made invalid by being bound to the other in the same act of legislation. The only concern which we have in that aspect of the matter is to determine whether the purpose specified is one for which Congress can make an appropriation without violating the fundamental law. If Congress, for reasons deemed by it to be satisfactory, chose to adopt the quantum of receipts from this particular tax as the measure of the appropriation, we perceive no valid basis for challenging its power to do so.

We inquire first: Is the proposed appropriation to the Philippine Treasury for a constitutional purpose? since an affirmative answer to that question will establish the constitutional purpose of the tax. The pertinent taxing clause provides in general terms (article 1, § 8, cl. 1) that taxes may be laid 'to pay the Debts and provide for the common Defence and general Welfare of the United States.' Primarily, and in a very high degree, whether a tax serves any of these purposes is a practical question addressed to the lawmaking department. And it will require a very plain case to warrant the courts in setting aside the conclusion of Congress in that regard. Compare Nicol v. Ames, 173 U.S. 509, 514—516, 19 S.Ct. 522, 43 L.Ed. 786. Nevertheless, such plain cases may exist; and the question is whether this is one of them.

The Philippine Islands and their inhabitants, from the beginning of our occupation, have borne a peculiar relation to the United States. The Islands constitute a dependency over which the United States, for more than a generation, has had and exercised supreme power of legislation and administration, Posadas v. National City Bank, 296 U.S. 497, 502, 56 S.Ct. 349, 351, 80 L.Ed. 351, a power limited only by the terms of the treaty of cession and those principles of the Constitution which by their nature are inherently inviolable. The possession of this well-nigh absolute power over a dependent people carries with it great obligations, as was pointed out by Mr. Root as Secretary of War in 1899. After referring to the practically unlimited power which we had over the Philippines, he said: 'I assume, also, that the obligations correlative to this great power are of the highest character, and that it is our unquestioned duty to make the interests of the people over whom we assert sovereignty the first and controlling consideration in all legislation and administration which concerns them, and to give them, to the greatest possible extent, individual freedom, self-government in accordance with their capacity, just and equal laws, and opportunity for education, for profitable industry, and for development in civilization.' Military and Colonial Policy of the United States, 161, 162.

Among these correlative duties is the moral obligation to protect, defend, and provide for the general welfare of, the inhabitants. And such an obligation well may require the appropriation and expenditure of money from the national purse—in which case the obligation fairly comes within the term 'debts' as used in the taxing clause. United States v. Realty Co., 163 U.S. 427, 440, 441, 16 S.Ct. 1120, 1125, 41 L.Ed. 215. Congress, from the beginning of its existence, has accepted and legislated upon that view of the broad meaning of the term. In innumerable instances, it has made appropriations to relieve needs caused by earthquakes, fire, and other events, not only in localities within or possessed by the United States, but in foreign countries as well. Government counsel has furnished us an impressive list of appropriations of this character; and in addition has called attention to the many instances of appropriations for the support and welfare of the Indians, and for the uses of the territories. Legislation of this character has been so long continued and its validity so long unquestioned that, as we said in United States v. Curtiss-Wright Corp., 299 U.S. 304, 322, 327, 328, 57 S.Ct. 216, 224, 81 L.Ed. 255: 'A legislative practice such as we have here, evidenced not by only occasional instances, but marked by the movement of a steady stream for a century and a half of time, goes a long way in the direction of proving the presence of unassailable ground for the constitutionality of the practice, to be found in the origin and history of the power involved, or in its nature, or in both combined.'

It may be that the tax and the appropriation of the proceeds therefrom in the present instance could be...