U.S. Const. art. I, § 8, cl. 1 confers upon the Congress power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States. The true construction of this clause undoubtedly is that the only thing granted is the power to tax for the purpose of providing funds for payment of the nation's debts and making provision for the general welfare.
Under the Agricultural Adjustment Act, the government claimed cotton taxes from respondent receivers and the receivers recommended that the claim be disallowed. The government argued that the Act was valid because Congress was authorized to appropriate and authorize spending for the "general welfare" under U.S. Const. art. I, § 9, cl. 7, and that the Act was an effort to aid farmers during the great depression. The district court found the taxes valid and ordered them paid, but the United States Circuit Court of Appeals reversed on appeal. The case was appealed to the Supreme Court of the United States.
Is the Agricultural Adjustment Act valid?
The Court held that while the Act might have been within Congress' power if it fell within the ambit of the term "general welfare," the Court did not have to reach the question of the interpretation of that whether it did so because the Act was unconstitutional on other grounds. The Act was clearly designed to regulate agriculture by coercing a non-cooperating minority to a desired action with economic pressure. However, the power to regulate agriculture was not granted to Congress by the Constitution, but rather, was reserved to the States. The tax, the appropriation of the funds raised, and the direction for their disbursement, were possibly permissible means to an unconstitutional end. Thus, Congress had no power to enforce its commands on the farmer to the ends sought by the Act, and it could not indirectly accomplish those ends by taxing and spending to purchase compliance.