Article 1, Section 8, Clause 1: The Taxing and Spending Clause

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;

This clause is composed of three subclauses. These grant the power to Congress to fund the operations of the federal government (the Taxation Clause), make a general statement about the purposes to which such revenues shall be applied (the Spending Clause), and require that collection of revenues must be uniform across the country (the Uniformity Clause).

The Taxation Clause mentions four classes of revenue. However, there is considerable overlap between these in modern usage. All the sources of revenues mentioned would nowadays be regarded as taxes, but the Taxing and Spending Clause as a whole makes more sense if “taxes” is understood to mean direct taxes. Duties are specifically a tax on something purchased abroad, while an impost can nowadays refer to almost any kind of tax. An excise is an internal tax on a particular commodity. Under the Articles of Confederation. the federal government had no independent power to tax, but had to rely on states paying assessments, which the states often ignored. This contributed to the ineffectiveness of the Confederation government. The Framers here granted Congress the power to raise revenue independently of the states and deliberately made the power broad.

The Spending Clause states the purposes for which revenues may be raised: to “provide for the common Defence and general Welfare of the United States”. Spending for the common defense is straightforwards and relatively uncontroversial: Congress has broad power to raise revenues for armies, navies, fortifications, and other facets of national defense. However, “general Welfare” is very broad, making this clause contentious almost from the start. Madison insisted both in The Federalist and in the Virginia ratifying convention that this was not a specific grant of power, but rather that Congress was restricted to raising revenues only for purposes related to the enumerated powers mentioned further on in Section 8.  Hamilton rejected Madison’s narrow construction in favor of a broad construction, in which Congress was granted an enumerated power to spend on whatever it judged would promote the common good of the nation. However, Hamilton did not promulgate this broad interpretation until after ratification, and we cannot help but sense a bait-and-switch.  We favor the narrow interpretation.

The Supreme Court long favored the narrow interpretation as well, but the New Deal Court reversed this in 1936, declaring that the power to spend for the general welfare was a separate enumerated power. This was the foundation of most of the New Deal and is the entire Constitutional basis for most current federal spending. Social Security, Medicare, Medicaid, the welfare system generally, agricultural subsidies, education subsidies — all have their sole basis in the broad interpretation of the Spending Clause.

There are nonetheless some restrictions on this power, though the Court has been inconsistent in their application. The spending power must be exercised only for matters of national, not local, welfare. Likewise, the power must not be exercised so as to coerce the states in matters reserved to them by the Tenth Amendment. Here the Court has ruled, quite inconsistently, that conditioning an entire state’s share of a spending initiative on its acceptance of certain regulations (as was attempted with the Affordable Care Act) is unconstitutionally coercive, but withholding 5% of a state’s share (as with highway funding) was not coercive enough to be unconstitutional. We understand that hairs must sometimes be split; but this kind of hair splitting is indefensible.

The Uniformity Clause requires that duties, imposts, and excises must be applied uniformly across the nation. The omission of “taxes” supports our interpretation that the Framers here meant direct taxes, which are already required to be applied in proportion to population in the Enumeration Clause. The original reason for the Sixteenth Amendment was not to give Congress the power to tax income. That was already acknowledged. Its purpose was to circumvent the requirement of uniformity, which rendered a progressive income tax impractical.