Brief Fact Summary. The federal unemployment system provided a scheme whereby employers paid a tax to the federal government, but they could deduct the same tax if they made a contribution to a state employment fund.
Synopsis of Rule of Law. For a tax and credit scheme to be unconstitutional as against the Fifth Amendment or of principles of federalism, there must be a showing that the tax and credit used together are coercive and/or that they impair the autonomy of the States.
Issue. Was the federal unemployment tax system in violation of the Fifth Amendment or of principles of federalism?
Held. No. The lower court’s decision is affirmed. The tax system was constitutional.
The tax system at issue is merely designed to assist the federal and state agencies to work together. Neither the States nor the citizens are injured. The system does not require the States to surrender powers essential to their quasi-sovereign status.
It is necessary to distinguish between coercion and temptation. Every tax is to some degree coercive. Every rebate from taxes conditioned upon conduct is to some extent a temptation. In the instant case, the tax system did not reach coercion.
To some extent it interposes an economic impediment to the activity taxed as compared with others not taxed.View Full Point of Law