The Federal Powers to Tax and to Spend (and other powers of Congress)
The Issues:  How far do the powers of Congress under the various grants extend?
The United States is a government of enumerated powers.  Congress, and the other two branches of the federal government, can only exercise those powers given in the Constitution.

The powers of Congress are enumerated in several places in the Constitution.  The most important listing of congressional powers appears in Article I, Section 8 (see left) which identifies in seventeen paragraphs many important powers of Congress.   In this section, we consider how several of the enumerated powers of Congress under the original Constitution have been interpreted.

The Congress shall have 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 power to tax:
Bailey v Drexel Furniture 

[Child Labor Tax Case] (1922)
Linder v United States (1925)

Steward Machine vs Davis (1937)

U. S. vs Kahriger (1953)
National Federation of Independent Business v Sebelius (2012)["individual mandate" case]

Article I, Section 8 gives Congress the power to "lay and collect taxes, duties, imports, and excises."  The Constitution allows Congress to tax in order to "provide for the common defense and general welfare."
The Court has flip-flopped on the issue of whether Congress has the constitutional power to tax in order to accomplish regulatory goals that would otherwise be outside of the scope of its enumerated powers.  In Bailey vs Drexel Furniture (1922), the Court invalidated a 10% tax on the annual profits of employers who knowingly employ child labor.  The tax, imposed after an earlier attempt to block the interstate transportation and sale of products produced by child labor was struck down in Hammer, was seen by the Court as an unconstitutional attempt to make an end-run around its earlier decision.  In 1925, in Linder v United States, the Court reversed the conviction of a doctor who had given three cocaine tablets to a patient to relieve an addiction.  The conviction, based on a law that imposed a $3 tax on doctors who prescribed cocaine, rested on the theory that the law limited the prescription of cocaine to the treatment of diseases, not addictions, and that the defendant had given cocaine tablets to an addict.  The Court concluded that the law could survive only as a revenue measure, and that the Taxing Power gave Congress no authority to regulate directly the practice of medicine--that is, to tell doctors who had paid the required tax what they can or cannot do for their patients.

The Court reversed its ban on taxes serving primarily regulatory (rather than revenue-producing) goals in Steward Machine (1937), which upheld a tax on employers designed to encourage states to enact unemployment compensation schemes.  In Kahriger (1953), the Court upheld a law requiring bookies to register and pay on tax on all wagers--even though the tax had the regulatory goal of wiping out bookmaking operations and could not be expected to produce significant revenue.

In perhaps the most significant taxing power case ever decided, the Court ruled in National Federation of Independent Business v Sebelius (2012) that the so-called "individual mandate" (generally considered a requirement that individuals purchase health insurance) contained in the Affordable Care Act could be sustained as a tax, even though the requirement was outside of Congress's power to regulate commerce.  Writing for five members of the Court, Chief Justice Roberts held that even though proponents of the Act consistently said a penalty, not a tax, would apply to individuals who failed to purchase insurance, it still operated as a tax and that a functional analysis should control.  The Court noted that failure to purchase insurance required a payment to the IRS, that no criminal penalties attached to failure to purchase insurance, and that the cost of the tax would, in most cases, be less than the cost of buying insurance.  In sum, the law did not make it unlawful to purchase insurance, allowing individuals a choice of paying a tax instead.  Roberts also reaffirmed that the Congress may seek to achieve regulatory goals through its taxing power that it might not be able to achieve under its other Article I powers.  Justices Kennedy, Alito, Scalia, and Thomas dissented, arguing that the taxing power could not sustain the mandate.

The Congress shall have 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 power to spend:
South Dakota vs Dole (1987)
National Federal of Independent Business v Sebelius (2012)

In the 1987 case of South Dakota vs Dole, the Supreme Court considered a federal law that required the Secretary of Transportation to withhold 5% of a state's federal highway dollars if the state allowed persons less than 21 years of age to purchase alcoholic beverages.  South Dakota, which allowed 18-year-olds to drink and stood to lose federal funds for highway construction, sued Secretary Dole, arguing that the law was not a constitutional exercise of the power of Congress to spend--but rather was an attempt to enact a national drinking age. In upholding the federal law, the Court announced a four-part test for evaluating the constitutionality of conditions attached to federal spending programs: (1) the spending power must be exercised in pursuit of the general welfare, (2) grant conditions must be clearly stated, (3) the conditions must be related to a federal interest in the national program or project, and (4) the spending power cannot be used to induce states to do things that would themselves be unconstitutional.  The Court considered--perhaps unrealistically--the grant condition to be a financial "inducement" for South Dakota to enact a higher drinking age rather than financial "compulsion" to do so--suggesting the possibility of a different result if a higher percentage of funds had been withheld.  In dissent, Justice O'Connor argued that spending conditions should be found constitutional only if they related to how the federal grant dollars were to be spent.

In 2012, the Court considered whether provisions of the Affordable Care Act, which withheld federal funds from states that failed to expand  Medicaid coverage in specified ways, was within the power of Congress under the Spending Clause.  In National Federation of Independent Business v Sebelius, the Court held that it was unconstitutional to threaten states with the withholding of all federal Medicaid funding, including their existing funding, for failing to expand coverage in the ways Congress sought to encourage.  Chief Justice Roberts, in a part of his opinion joined by Justices Breyer and Kagan, concluded that federal funds withheld, representing perhaps 10% of a state's entire budget, was so substantial that states would have no real choice but to give into Congress's demands.  As a result, seven justices agreed that the Affordable Care Act's Medicaid expansion provisions violated the principle that the spending power can not be used to coerce states into enacting legislation or participating in a federal program.  The Court distinguished South Dakota v Dole, noting that the funds potentially lost by South Dakota in that case representing only one-half a percent of the state's budget.

The Congress shall have Power to dispose of and make all needful Rules and Regulations
 respecting the Territory or other Property belonging to the United States....

The power to regulate federal property:
Kleppe vs New Mexico (1976)

In 1976, a dispute over 19 wild burros rounded up on federal land and sold by New Mexico's Livestock Board reached the Supreme Court (New Mexico vs Kleppe).  The Department of Interior argued the New Mexico's action violated the Wild Free-Roaming Horses and Burros Act, while New Mexico countered that the Act exceeded the power granted to Congress by the Property Clause of Article IV, Section 3.  New Mexico contended that Congress could regulate only those state actions on federal land that threaten to damage public lands.  The Court, however, rejected this narrow interpretation.  Congress has the power to enact "needful" regulations "respecting" the public lands and--according to the Court---what is a "needful" regulation is a decision "entrusted primarily to the judgment of Congress."  The Court concluded the federal government "has a power over its own property analogous to the police power" of the states.  The Court did "not think it appropriate [in Kleppe] determine the extent to which the Property Clause empowers Congress to protect animals on private lands."

...To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries...

In 2003, the Supreme Court decided Eldred v Ashcroft, which provided the Court its first opportunity to interpret the power of Congress under Article I to extend copyright protection to authors "for limited times."  Eldred operated a website that offered for sale works for which copyright protection had expired (or "fallen into the public domain").  He challenged the constitutionality of the Copyright Term Extension Act of 1998--sometimes called the "Mickey Mouse Protection Act" because Disney had lobbied hard for extension of its copyright protection for Mickey Mouse, which was nearing the end of its 75-year term of protection under existing copyright law.  Simply put, the argument of Eldred and his many supporters (including librarians and academics who argue that creativity will benefit from allowing use of expired works) was that "limited times" doesn't mean "forever"--and that 75 years of protection is more than enough time to provide an adequate financial incentive for authors.  Eldred noted that Congress's first copyright act offered only seventeen years of protection.  By a vote of 7 to 2, the Court ruled in Eldred that Congress did not exceed its power under the Copyright Clause.

The power to protect original works of authorship:
Eldred vs Ashcroft (2003) and other legal documents are accessible from: Harvard's Open Law

Eric Eldred, plaintiff in suit challenging the constitutionality of the 1998 Sonny Bono Copyright Term Extension Act
(photo: ABA Journal)


Key Constitutional Grants 
of Powers to Congress

Article I, Section. 8. 

The Congress shall have 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; but all Duties, Imposts and Excises shall be uniform throughout the United States; 

To borrow Money on the credit of the United States; 

 To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; 

 To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States; 

 To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; 

 To provide for the Punishment of counterfeiting the Securities and current Coin of the United States; 

 To establish Post Offices and post Roads; 

 To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

 To constitute Tribunals inferior to the supreme Court; 

 To define and punish Piracies and Felonies committed on the high Seas, and Offences against the Law of Nations; 

 To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water; 

 To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years; 

 To provide and maintain a Navy; 

 To make Rules for the Government and Regulation of the land and naval Forces; 

 To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions; 

 To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress; 

 To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for  the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings;--And 

 To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof. 

Article IV, Section 3

 New States may be admitted by the Congress into this Union; but no new State shall be formed or erected within the Jurisdiction of any other State; nor any State be formed by the Junction of two or more States, or Parts of States, without the Consent of the Legislatures of the States concerned as well as of the Congress. 

 The Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States; and nothing in this Constitution shall be so construed as to Prejudice any Claims of the United States, or of any particular State. 

Amendment XVI
(Ratified February 3, 1913.) 

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration. 



1. Does Congress have the power to tax for a purely regulatory, non-revenue raising, goal?  Could Congress require all prostitutes to register and pay a tax if it could not make prostitution a federal crime directly?
2.  Do the Court's recent Commerce Clause decisions give reason to think the Court will also tighten up the Congress's use of its taxing and spending powers?
3.  In South Dakota vs Dole, is it clear that South Dakota's lower drinking age jeopardized federal interests in the national highway program?  If so, how substantially?
4.  Could Congress condition the receiving of federal dollars to fight crime on a state's having enacted the death penalty?  How--if at all--would such a condition differ from the condition upheld in South Dakota vs Dole?
5.  What result in South Dakota vs Dole if South Dakota stood to lose all federal highway money if it didn't raise its drinking age?  What if it stood to lose 30%?


1.  Does the Property Clause give the Congress the power to protect wildlife on private land that spends most of its time on federal land (on national park, national wildlife refuge, national forest, or BLM land)?  Does the Property Clause empower the Congress to protect a grizzly bear or wolf wanders from federal land onto the private land of a rancher?--or is the rancher free to fire away, state law permitting?
2.  Does the Property Clause empower Congress to regulate private activities on private land that adversely effect public lands, such as air pollution from a nearby plant, bright lights from neon advertising, or noise from a racetrack?
3.  Does Article IV, Section 3 give Congress the power to regulate any behavior of residents of U. S. Territories that it chooses to, provided no other provision of the Constitution is offended?  For example, could the Violence Against Women Act provision invalidated in Morrison be enforceable in  U. S. Territories (such as Guam or Puerto Rico), even though it can't be in the fifty states?

 Exploring Constitutional Law