United States v. Butler

• Citation: 56 S.Ct. 312,80 L.Ed. 477,102 A.L.R. 914,297 U.S. 1
• Decision Date: 06 January 1936
• Docket Number: No. 401,401
• Parties: UNITED STATES v. BUTLER et al
• Court: United States Supreme Court

297 U.S. 1

56 S.Ct. 312

80 L.Ed. 477

UNITED STATES

v BUTLER et al.

No. 401.

Argued Dec. 9, 10, 1935.

Decided Jan. 6, 1936.

[Syllabus from pages 1-13 intentionally omitted]

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Messrs. Homer S. Cummings, Atty. Gen., and Stanley F. Reed, Sol. Gen., of Washington, D.C., for the United States.

Messrs. George Wharton Pepper, of Philadelphia, Pa., and Edward R. Hale and Bennett Sanderson, both of Boston, Mass., for respondents.

[Argument of Counsel from pages 13-53 intentionally omitted]

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Mr. Justice ROBERTS delivered the opinion of the Court.

In this case we must determine whether certain provisions of the Agricultural Adjustment Act, 1933,¹ conflict with the Federal Constitution.

Title 1 of the statute is captioned 'Agricultural Adjustment.' Section 1 (7 U.S.C.A. § 601) recites that an economic emergency has arisen, due to disparity between the prices of agricultural and other commodities, with consequent destruction of farmers' purchasing power and breakdown in orderly exchange, which, in turn, have affected transactions in agricultural commodities with a national public interest and burdened and obstructed the normal currents of commerce, calling for the enactment of legislation.

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Section 2 (7 U.S.C.A. § 602) declares it to be the policy of Congress:

'To establish and maintain such balance between the production and consumption of agricultural commodities, and such marketing conditions therefor, as will reestablish prices to farmers at a level that will give agricultural commodities² a purchasing power with respect to articles that farmers buy, equivalent to the purchasing power of agricultural commodities in the base period.'

The base period, in the case of cotton, and all other commodities except tobacco, is designated as that between August, 1909, and July, 1914.

The further policies announced are an approach to the desired equality by gradual correction of present inequalities 'at as rapid a rate as is deemed feasible in view of the current consumptive demand in domestic and foreign markets,' and the protection of consumers' interest by readjusting farm production at such level as will not increase the percentage of the consumers' retail expenditures for agricultural commodities or products derived therefrom, which is returned to the farmer, above the percentage returned to him in the base period.

Section 8 (48 Stat. 34) provides, amongst other things, that, 'In order to effectuate the declared policy,' the Secretary of Agriculture shall have power

'(1) To provide for reduction in the acreage or reduction in the production for market, or both, of any basic agricultural commodity, through agreements with producers or by other voluntary methods, and to provide for rental or benefit payments in connection therewith or upon that part of the production of any basic agricultural commodity required for domestic consumption, in such amounts as the Secretary deems fair and reasonable, to

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be paid out of any moneys available for such payments. * * *

'(2) To enter into marketing agreements with processors, associations of producers, and others engaged in the handling, in the current of interstate or foreign commerce of any agricultural commodity or product thereof, after due notice and opportunity for hearing to interested parties. * * *

'(3) To issue licenses permitting processors, associations of producers, and others to engage in the handling, in the current of interstate or foreign commerce, of any agricultural commodity or product thereof, or any competing commodity or product thereof.'

It will be observed that the Secretary is not required, but is permitted, if, in his uncontrolled judgment, the policy of the act will so be promoted, to make agreements with individual farmers for a reduction of acreage or production upon such terms as he may think fair and reasonable.

Section 9(a), 48 Stat. 35 enacts:

'To obtain revenue for extraordinary expenses incurred by reason of the national economic emergency, there shall be levied processing taxes as hereinafter provided. When the Secretary of Agriculture determines that rental or benefit payments are to be made with respect to any basic agricultural commodity, he shall proclaim such determination, and a processing tax shall be in effect with respect to such commodity from the beginning of the marketing year therefor next following the date of such proclamation. The processing tax shall be levied, assessed, and collected upon the first domestic processing of the commodity, whether of domestic production or imported, and shall be paid by the processor.'

The Secretary may from time to time, if he finds it necessary for the effectuation of the policy of the act, readjust the amount of the exaction to meet the require-

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ments of subsection (b). The tax is to terminate at the end of any marketing year if the rental or benefit payments are discontinued by the Secretary with the expiration of that year.

Section 9(b), 7 U.S.C.A. § 609(b), fixes the tax 'at such rate as equals the difference between the current average farm price for the commodity and the fair exchange value,' with power in the Secretary, after investigation, notice, and hearing, to readjust the tax so as to prevent the accumulation of surplus stocks and depression of farm prices.

Section 9(c), 7 U.S.C.A. § 609(c), directs that the fair exchange value of a commodity shall be such a price as will give that commodity the same purchasing power with respect to articles farmers buy as it had during the base period, and that the fair exchange value and the current average farm price of a commodity shall be ascertained by the Secretary from available statistics in his department.

Section 12(a), 7 U.S.C.A. § 612(a), appropriates $100,000,000 'to be available to the Secretary of Agriculture for administrative expenses under this title (chapter) and for rental and benefit payments;' and Section 12(b), 7 U.S.C.A. § 612(b), appropriates the proceeds derived from all taxes imposed under the act 'to be available to the Secretary of Agriculture for expansion of markets and removal of surplus agricultural products. * * * Administrative expenses, rental and benefit payments, and refunds on taxes.'

Section 15(d), 7 U.S.C.A. § 615(d), permits the Secretary, upon certain conditions, to impose compensating taxes on commodities in competition with those subject to the processing tax.

By section 16 (see 7 U.S.C.A. § 616) a floor tax is imposed upon the sale or other disposition of any article processed wholly or in chief value from any commodity with respect to which a processing tax is to be levied in amount equivalent to that of the processing tax which would be payable with respect to the commodity from which the article is processed if the processing had occurred on the date when the processing tax becomes effective.

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On July 14, 1933, the Secretary of Agriculture, with the approval of the President, proclaimed that he had determined rental and benefit payments should be made with respect to cotton; that the marketing year for that commodity was to begin August 1, 1933; and calculated and fixed the rates of processing and floor taxes on cotton in accordance with the terms of the act.

The United States presented a claim to the respondents as receivers of the Hoosac Mills Corporation for processing and floor taxes on cotton levied under sections 9 and 16 of the act. The receivers recommended that the claim be disallowed. The District Court found the taxes valid and ordered them paid. ³ Upon appeal the Circuit Court of Appeals reversed the order.⁴ The judgment under review was entered prior to the adoption of the amending act of August 24, 1935,⁵ and we are therefore concerned only with the original act.

First. At the outset the United States contends that the respondents have no standing to question the validity of the tax. The position is that the act is merely a revenue measure levying an excise upon the activity of processing cotton—a proper subject for the imposition of such a tax—the proceeds of which go into the federal Treasury and thus become available for appropriation for any purpose. It is said that what the respondents are endeavoring to do is to challenge the intended use of the money pursuant to Congressional appropriation when, by con ession, that money will have become the property of the government and the taxpayer will no longer have any interest in it. Massachusetts v. Mellon, 262 U.S. 447, 43 S.Ct. 597, 67 L.Ed. 1078, is claimed to foreclose litigation by the respondents or other taxpayers, as such, looking to restraint of the expenditure of government funds. That case might be an authority

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in the petitioners' favor if we were here concerned merely with a suit by a taxpayer to restrain the expenditure of the public moneys. It was there held that a taxpayer of the United States may not question expenditures from its treasury on the ground that the alleged unlawful diversion will deplete the public funds and thus increase the burden of future taxation. Obviously the asserted interest of a taxpayer in the federal government's funds and the supposed increase of the future burden of taxation is minute and indeterminable. But here the respondents who are called upon to pay moneys as taxes, resist the exaction as a step in an unauthorized plan. This circumstance clearly distinguishes the case. The government in substance and effect asks us to separate the Agricultural Adjustment Act into two statutes, the one levying an excise on processors of certain commodities; the other appropriating the public moneys independently of the first. Passing the novel suggestion that two statutes enacted as parts of a single scheme should be tested as if they were distinct and unrelated, we think the legislation now before us is not susceptible of such separation and treatment.

The tax can only be sustained by ignoring the avowed purpose and operation of ...