The scheme of old age benefits created by the provisions of Title II of the Social Security Act of August 14, 1935, providing for the payment of such benefits, and authorizing future appropriations to an account to be set up by the Treasury for such purpose, sufficient to provide for the contemplated benefits, is within the power of Congress to spend money in aid of the general welfare, and therefore is not in contravention of the limitations of the Tenth Amendment.
Petitioner, Commissioner of Internal Revenue, sought review of a decision by the United States Court of Appeals for the First Circuit, in a suit brought by respondent shareholder challenging Title II and VIII of the Social Security Act, 42 U.S.C.S. § 7. The court of appeals held that the portions of the Act were void as an invasion of powers reserved by the Tenth Amendment to the states or to the people. The shareholder brought suit seeking to restrain the corporation from making the payments and deductions called for by the Act, which the shareholder stated to be void under the Constitution of the United States. The Commissioner argued that the employer, not being subject to tax under the challenged provisions, could not challenge their validity, and that the shareholder, whose rights were no greater than those of his corporation, had even less standing to be heard. The court of appeals found that Title II was void as an invasion of powers reserved by the Tenth Amendment to the states or to the people, and that Title VIII collapsed along with it. As an additional reason for invalidating the tax upon employers, the court of appeals held that it was not an excise as excises were understood when the Constitution was adopted.
Does the scheme of "Federal Old-Age Benefits" set up by Title II of the Social Security Act contravene the limitations of the Tenth Amendment?
The Court reversed the decision in favor of the shareholder, finding that the Act was a valid exercise of Congress for the good of all and that Congress could spend money in aid of the "general welfare," U.S. Const. art. I, § 8. The Court held that Congress was given the power to spend money for the public good under the Constitution and rejected the contention that the Act was promulgated in violation of the Tenth Amendment. The Court reasoned that with many people growing old and dependent, the Act was a protection and that the only way for it to succeed was for Congress to exercise a power that was national so that it could serve the interests of all.